Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

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). ☒ Yes ☐ No

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☐☒ ~~Yes ☒~~ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Number of Shares of Common Stock, par value $0.01 per share, outstanding at ~~May 27,~~August 26, 2022 was ~~27,587,354~~27,613,894.


(In thousands, except share data)	April 30, 2022			January 29, 2022			May 1, 2021			July 30, 2022			January 29, 2022			July 31, 2021
Assets
Current Assets:
Cash and cash equivalents	$	86,179		$	117,443		$	174,643		$	51,620		$	117,443		$	146,506
Marketable securities		10,965			14,961			0			10,994			14,961			17,431
Accounts receivable		14,442			14,159			7,477			10,677			14,159			7,871
Merchandise inventories		345,021			285,205			268,629			385,510			285,205			308,141
Other		14,592			10,264			11,896			18,131			10,264			13,131
Total Current Assets		471,199			442,032			462,645			476,932			442,032			493,080
Property and equipment – net		110,033			88,533			62,038			124,789			88,533			65,871
Operating lease right-of-use assets		222,259			220,952			207,571			254,537			220,952			208,472
Intangible assets		32,600			32,600			0			32,600			32,600			0
Goodwill		11,698			11,384			0			10,786			11,384			0
Deferred income taxes		0			2,699			4,965			0			2,699			4,135
Other noncurrent assets		13,945			14,064			12,870			14,871			14,064			12,498
Total Assets	$	861,734		$	812,264		$	750,089		$	914,515		$	812,264		$	784,056

Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	$	116,837		$	69,092		$	102,405		$	113,826		$	69,092		$	96,494
Accrued and other liabilities		31,243			33,053			55,011			22,893			33,053			50,126
Current portion of operating lease liabilities		51,287			51,563			42,895			52,523			51,563			47,769
Total Current Liabilities		199,367			153,708			200,311			189,242			153,708			194,389
Long-term portion of operating lease liabilities		195,426			194,788			185,205			226,115			194,788			185,555
Deferred income taxes		409			0			0			4,436			0			0
Deferred compensation		10,482			10,901			11,614			10,779			10,901			11,440
Other		336			334			2,684			311			334			2,760
Total Liabilities		406,020			359,731			399,814			430,883			359,731			394,144

Shareholders’ Equity:
Common stock, $0.01 par value, 50,000,000 shares authorized and 41,049,190 shares issued in each period, respectively		410			410			410			410			410			410
Additional paid-in capital		79,595			80,681			77,041			80,760			80,681			78,330
Retained earnings		577,823			553,487			447,875			604,192			553,487			490,069
Treasury stock, at cost, 13,461,836 shares, 12,882,789 shares and 12,702,788 shares, respectively		(202,114	)		(182,045	)		(175,051	)
Treasury stock, at cost, 13,435,296 shares, 12,882,789 shares and 12,810,740 shares, respectively											(201,730	)		(182,045	)		(178,897	)
Total Shareholders’ Equity		455,714			452,533			350,275			483,632			452,533			389,912
Total Liabilities and Shareholders’ Equity	$	861,734		$	812,264		$	750,089		$	914,515		$	812,264		$	784,056


(In thousands, except per share data)	Thirteen Weeks Ended April 30, 2022			Thirteen Weeks Ended May 1, 2021			Thirteen Weeks Ended July 30, 2022			Thirteen Weeks Ended July 31, 2021			Twenty-six Weeks Ended July 30, 2022			Twenty-six Weeks Ended July 31, 2021
Net sales	$	317,527		$	328,457		$	312,268		$	332,230		$	629,795		$	660,687
Cost of sales (including buying, distribution and occupancy costs)		204,664			198,299			199,138			196,478			403,802			394,777
Gross profit		112,863			130,158			113,130			135,752			225,993			265,910
Selling, general and administrative expenses		77,479			72,555			74,341			76,038			151,820			148,593
Operating income		35,384			57,603			38,789			59,714			74,173			117,317
Interest income		(32	)		(4	)		(138	)		(2	)		(170	)		(6	)
Interest expense		95			119			65			119			160			238
Income before income taxes		35,321			57,488			38,862			59,597			74,183			117,085
Income tax expense		8,424			14,246			9,953			15,385			18,377			29,631
Net income	$	26,897		$	43,242		$	28,909		$	44,212		$	55,806		$	87,454
Net income per share:
Basic	$	0.96		$	1.53		$	1.05		$	1.56		$	2.01		$	3.09
Diluted	$	0.95		$	1.51		$	1.04		$	1.54		$	1.99		$	3.05
Weighted average shares:
Basic		27,996			28,258			27,590			28,323			27,784			28,290
Diluted		28,331			28,647			27,812			28,652			28,061			28,643


	Thirteen Weeks Ended																			Thirteen Weeks Ended
	Common Stock							Additional Paid-In			Retained			Treasury						Common Stock							Additional Paid-In			Retained			Treasury
(In thousands, except per share data)	Issued		Treasury			Amount		Capital			Earnings			Stock			Total			Issued		Treasury			Amount		Capital			Earnings			Stock			Total
Balance at January 29, 2022		41,049		(12,883	)	$	410	$	80,681		$	553,487		$	(182,045	)	$	452,533
Balance at April 30, 2022																					41,049		(13,462	)	$	410	$	79,595		$	577,823		$	(202,114	)	$	455,714
Dividends declared ($0.09 per share)												(2,561	)					(2,561	)												(2,540	)					(2,540	)
Employee stock purchase plan purchases				2					18						27			45
Stock-based compensation awards				170					(2,467	)					2,467			0
Shares surrendered by employees to pay taxes on stock-based compensation awards				(68	)										(2,048	)		(2,048	)
Purchase of common stock for treasury				(683	)										(20,515	)		(20,515	)
Stock-based compensation expense									1,363									1,363
Net income												26,897						26,897
Balance at April 30, 2022		41,049		(13,462	)	$	410	$	79,595		$	577,823		$	(202,114	)	$	455,714

Balance at January 30, 2021		41,049		(12,839	)	$	410	$	78,737		$	406,655		$	(175,626	)	$	310,176
Dividends declared ($0.07 per share)												(2,022	)					(2,022	)
Employee stock purchase plan purchases				2					31						33			64					3					9						39			48
Stock-based compensation awards				210					(2,878	)					2,878			0					26					(383	)					383			0
Shares surrendered by employees to pay taxes on stock-based compensation awards				(76	)										(2,336	)		(2,336	)				(2	)										(38	)		(38	)
Stock-based compensation expense									1,151									1,151										1,539									1,539
Net income												43,242						43,242													28,909						28,909
Balance at July 30, 2022																					41,049		(13,435	)	$	410	$	80,760		$	604,192		$	(201,730	)	$	483,632

Balance at May 1, 2021		41,049		(12,703	)	$	410	$	77,041		$	447,875		$	(175,051	)	$	350,275			41,049		(12,703	)	$	410	$	77,041		$	447,875		$	(175,051	)	$	350,275
Dividends declared ($0.07 per share)																															(2,018	)					(2,018	)
Employee stock purchase plan purchases																							1					15						13			28
Stock-based compensation awards																							8					(112	)					112			0
Purchase of common stock for treasury																							(117	)										(3,971	)		(3,971	)
Stock-based compensation expense																												1,386									1,386
Net income																															44,212						44,212
Balance at July 31, 2021																					41,049		(12,811	)	$	410	$	78,330		$	490,069		$	(178,897	)	$	389,912


(In thousands)	Thirteen Weeks Ended April 30, 2022			Thirteen Weeks Ended May 1, 2021			Twenty-six Weeks Ended July 30, 2022			Twenty-six Weeks Ended July 31, 2021
Cash Flows From Operating Activities
Net income	$	26,897		$	43,242		$	55,806		$	87,454
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,677			4,315			10,416			8,926
Stock-based compensation		1,240			1,227			2,741			2,686
Loss on retirement and impairment of assets, net		22			757			83			1,034
Deferred income taxes		3,108			670			7,135			1,499
Non-cash operating lease expense		11,998			11,434			23,497			21,214
Other		304			1,187			384			1,845
Changes in operating assets and liabilities:
Accounts receivable		(283	)		(381	)		3,481			(775	)
Merchandise inventories		(59,816	)		(35,363	)		(100,305	)		(74,875	)
Operating leases		(12,942	)		(16,682	)		(24,794	)		(22,140	)
Accounts payable and accrued liabilities		41,697			61,519			40,514			53,236
Other		801			4,595			(10,040	)		(257	)
Net cash provided by operating activities		17,703			76,520			8,918			79,847
Cash Flows From Investing Activities
Purchases of property and equipment		(26,907	)		(4,083	)		(50,198	)		(12,137	)
Investments in marketable securities and other		(6	)		0			(11	)		(17,482	)
Sales of marketable securities and other		3,040			0			3,040			0
Net cash used in investing activities		(23,873	)		(4,083	)		(47,169	)		(29,619	)
Cash Flows From Financing Activities
Proceeds from issuance of stock		45			64			93			92
Dividends paid		(2,576	)		(2,054	)		(5,064	)		(4,039	)
Purchase of common stock for treasury		(20,515	)		0			(20,515	)		(3,971	)
Shares surrendered by employees to pay taxes on stock-based compensation awards		(2,048	)		(2,336	)		(2,086	)		(2,336	)
Net cash used in financing activities		(25,094	)		(4,326	)		(27,572	)		(10,254	)
Net (decrease) increase in cash and cash equivalents		(31,264	)		68,111			(65,823	)		39,974
Cash and cash equivalents at beginning of period		117,443			106,532			117,443			106,532
Cash and cash equivalents at end of period	$	86,179		$	174,643		$	51,620		$	146,506
Supplemental disclosures of cash flow information:
Cash paid during period for interest	$	30		$	118		$	164		$	238
Cash paid during period for income taxes	$	61		$	68		$	13,955		$	16,784
Capital expenditures incurred but not yet paid	$	5,173		$	1,323		$	1,899		$	941
Dividends declared but not yet paid	$	169		$	101		$	222		$	135

Note 3 - Net Income Per Share

The following tables set forth the computation of basic and diluted net income per share as shown on the face of the accompanying Condensed Consolidated Statements of Income:


	Thirteen Weeks Ended													Thirteen Weeks Ended
	April 30, 2022						May 1, 2021							July 30, 2022						July 31, 2021
			(In thousands, except per share data)								��					(In thousands, except per share data)
Basic Net Income per Share:	Net Income		Shares		Per Share Amount		Net Income		Shares			Per Share Amount		Net Income		Shares		Per Share Amount		Net Income		Shares		Per Share Amount
Net income available for basic common shares and basic net income per share	$	26,897		27,996	$	0.96	$	43,242		28,258		$	1.53	$	28,909		27,590	$	1.05	$	44,212		28,323	$	1.56
Diluted Net Income per Share:
Net income	$	26,897					$	43,242						$	28,909					$	44,212
Conversion of stock-based compensation arrangements		0		335				0		389					0		222				0		329
Net income available for diluted common shares and diluted net income per share	$	26,897		28,331	$	0.95	$	43,242		28,647		$	1.51	$	28,909		27,812	$	1.04	$	44,212		28,652	$	1.54


	Twenty-six Weeks Ended
	July 30, 2022						July 31, 2021
			(In thousands, except per share data)
Basic Net Income per Share:	Net Income		Shares		Per Share Amount		Net Income		Shares		Per Share Amount
Net income available for basic common shares and basic net income per share	$	55,806		27,784	$	2.01	$	87,454		28,290	$	3.09
Diluted Net Income per Share:
Net income	$	55,806					$	87,454
Conversion of stock-based compensation arrangements		0		277				0		353
Net income available for diluted common shares and diluted net income per share	$	55,806		28,061	$	1.99	$	87,454		28,643	$	3.05

The computation of basic net income per share of common stock is based on the weighted average number of common shares outstanding during the period. The computation of diluted net income per share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units. The computation of diluted net income per share for the thirteen and twenty-six weeks ended ~~April~~July 30, 2022 excluded approximately ~~24,000~~318,000 and 31,000, respectively, of unvested stock-based awards that will be settled in shares because the impact would have been anti-dilutive. ~~During the thirteen weeks ended May 1, 2021, approximately~~ ~~6,000~~No unvested stock-based awards that will be settled in shares were excluded from the computation of diluted net income per share ~~because~~for the ~~impact would have been anti-dilutive.~~thirteen and twenty-six weeks ended July 31, 2021.

Note 4 - Fair Value Measurements

The following table presents financial instruments that are measured at fair value on a recurring basis at ~~April~~July 30, 2022, January 29, 2022 and ~~May 1,~~July 31, 2021:


	Fair Value Measurements								Fair Value Measurements
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
As of April 30, 2022
As of July 30, 2022
Cash equivalents - money market mutual funds	$	90,598	$	0	$	0	$	90,598	$	41,401	$	0	$	0	$	41,401
Marketable securities - mutual funds that fund deferred compensation		10,965		0		0		10,965		10,994		0		0		10,994
Total	$	101,563	$	0	$	0	$	101,563	$	52,395	$	0	$	0	$	52,395
As of January 29, 2022
Cash equivalents - money market mutual funds	$	115,528	$	0	$	0	$	115,528	$	115,528	$	0	$	0	$	115,528
Marketable securities - mutual funds that fund deferred compensation		14,961						14,961		14,961						14,961
Total	$	130,489	$	0	$	0	$	130,489	$	130,489	$	0	$	0	$	130,489
As of May 1, 2021
As of July 31, 2021
Cash equivalents - money market mutual funds	$	175,612	$	0	$	0	$	175,612	$	132,514	$	0	$	0	$	132,514
Marketable securities - mutual funds that fund deferred compensation										17,431						17,431
Total									$	149,945	$	0	$	0	$	149,945

During fiscal 2021, we invested in publicly traded mutual funds with readily determinable fair values. These marketable securities are designed to mitigate volatility in our Condensed Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of ~~April~~July 30, 2022, these marketable securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. As of ~~April~~July 30, 2022, the balance in our deferred compensation plan was $~~10.5~~10.8 million, of which $~~53,000~~42,000 was in Accrued and other liabilities based on scheduled payments due within the next 12 months and the remaining balance was in Deferred compensation, a long-term liability. To the extent there are funds in excess of the total ~~non-qualifi~~ednon-qualified deferred compensation plan liability, such funds are invested in a stable value mutual fund. We classify these marketable securities as current assets because we have the ability to convert the securities into cash at our discretion and these marketable securities are not held in a rabbi trust. We have recognized unrealized losses of $~~2.6~~2.5 million related to equity securities still held at ~~April~~July 30, 2022.

The fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

Long-Lived Asset Impairment Testing

We periodically evaluate our long-lived assets for impairment if events or circumstances indicate that the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. Store level asset groupings typically include property and equipment and operating lease right-of-use assets. If the estimated, undiscounted future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in selling, general and administrative expenses. If the operating lease right-of-use asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease term.

We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, exercise of future lease renewal options and the store’s contribution to cash flows and, by their nature, include judgments about how current initiatives will impact future performance. We estimate the fair value of operating lease right-of-use assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.

External factors, such as the local environment in which the store is located, including store traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors can significantly impact the estimated future cash flows. An increase or decrease in the projected cash flow can significantly impact the fair value of these assets, which may have an effect on the impairment recorded. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.

During the thirteen and twenty-six weeks ended ~~May 1,~~July 31, 2021, we recorded impairment charges of $~~724,000~~243,000 and $967,000 associated with ~~two stores.~~one store and three stores, respectively. These charges were included in selling, general and administrative expenses. ~~NaN~~No impairment charges were recorded during the thirteen and twenty-six weeks ended ~~April~~July 30, 2022, and 0no impairments of operating right-of-use assets have been recorded in ~~either period.~~any of these periods.

Note 5 - Stock-Based Compensation

Stock-based compensation includes share-settled awards issued pursuant to our 2017 Equity Incentive Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights. For the thirteen and twenty-six weeks ended ~~April~~July 30, 2022 and ~~May 1,~~July 31, 2021, stock-based compensation expense was comprised of the following:


							Thirteen			Thirteen			Twenty-six			Twenty-six
							Weeks Ended			Weeks Ended			Weeks Ended			Weeks Ended
(In thousands)	Thirteen Weeks Ended April 30, 2022			Thirteen Weeks Ended May 1, 2021			July 30, 2022			July 31, 2021			July 30, 2022			July 31, 2021
Share-settled equity awards	$	1,355		$	1,140		$	1,530		$	1,381		$	2,885		$	2,521
Stock appreciation rights		(123	)		76			(38	)		74			(161	)		149
Employee stock purchase plan		8			11			9			5			17			16
Total stock-based compensation expense	$	1,240		$	1,227		$	1,501		$	1,460		$	2,741		$	2,686
Income tax effect at statutory rates	$	(296	)	$	(304	)	$	(385	)	$	(377	)	$	(678	)	$	(680	)
Additional income tax benefit on vesting of share-settled awards	$	(495	)	$	(880	)	$	(26	)	$	(5	)	$	(521	)	$	(885	)

As of ~~April~~July 30, 2022, approximately $~~11.4~~10.5 million of unrecognized compensation expense remained related to our share-settled equity awards. The cost is expected to be recognized over a weighted average period of approximately ~~1.9~~1.6 years.

Share-Settled Equity Awards

The following table summarizes transactions for our restricted stock units and performance stock units:

Number of
Shares

Weighted-
Average Grant
Date Fair Value

Outstanding at January 29, 2022

457,038

$
16.54

Granted

336,164

30.52

Vested

(170,425
)

18.46

Forfeited

(25,103
)

(18.07
)
Outstanding at April 30, 2022

597,674

$
23.79


	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 29, 2022		457,038		$	16.54
Granted		345,164			30.32
Vested		(176,425	)		18.28
Forfeited		(25,103	)		18.07
Outstanding at July 30, 2022		600,674		$	23.88

The total fair value at grant date of restricted stock units and performance stock units that vested during ~~each of~~ the ~~thirteen~~twenty-six weeks ended ~~April~~July 30, 2022 and ~~May 1,~~July 31, 2021 was $3.2 million and $3.1 ~~million.~~million, respectively. The weighted-average grant date fair value of restricted stock units and performance stock units granted during the ~~thirteen~~twenty-six weeks ended ~~April 30, 2022 and May 1,~~July 31, 2021 was $~~30.52~~28.21.

No restricted stock and other stock awards vested during the twenty-six weeks ended July 30, 2022. The total fair value at grant date of restricted stock and other stock awards that vested during the twenty-six weeks ended July 31, 2021 was $~~28.21~~26,000~~, respectively.~~. The weighted-average grant date fair value of restricted stock and other stock awards granted during the twenty-six weeks ended July 31, 2021 was $32.65.

Note 6 – Revenue

Disaggregation of Revenue by Product Category

Revenue is disaggregated by product category below. Net sales and percentage of Net sales for the thirteen and twenty-six weeks ended ~~April~~July 30, 2022 and ~~May 1,~~July 31, 2021 were as follows:


(In thousands)	Thirteen Weeks Ended July 30, 2022				Thirteen Weeks Ended July 31, 2021
Non-Athletics:
Women’s	$	94,013	30	%	$	83,141	25	%
Men’s		55,102	18			51,678	16
Children’s		22,822	7			22,553	7
Total		171,937	55			157,372	48

Athletics:
Women’s		40,511	13			49,648	15
Men’s		50,776	17			66,902	20
Children’s		30,977	10			39,925	12
Total		122,264	40			156,475	47

Accessories		16,664	5			16,266	5

Other		1,403	0			2,117	0

Total	$	312,268	100	%	$	332,230	100	%

(In thousands)

Thirteen Weeks
Ended April 30, 2022

Thirteen Weeks
Ended May 1, 2021

Non-Athletics:

Women’s

$
88,554

28
%

$
75,531

23
%
Men’s

49,152

15

44,282

13

Children’s

21,405

7

23,293

7

Total

159,111

50

143,106

43

Athletics:

Women’s

51,034

16

58,595

18

Men’s

53,026

17

65,724

20

Children’s

36,731

11

42,578

13

Total

140,791

44

166,897

51

Accessories

15,752

5

16,627

5

Other

1,873

1

1,827

1

Total

$
317,527

100
%

$
328,457

100
%


(In thousands)	Twenty-six Weeks Ended July 30, 2022				Twenty-six Weeks Ended July 31, 2021
Non-Athletics:
Women’s	$	182,569	29	%	$	158,672	24	%
Men’s		104,254	17			95,960	15
Children’s		44,231	7			45,846	7
Total		331,054	53			300,478	46

Athletics:
Women’s		91,545	14			108,243	16
Men’s		103,802	16			132,626	20
Children’s		67,705	11			82,503	12
Total		263,052	41			323,372	48

Accessories		32,414	5			32,894	5

Other		3,275	1			3,943	1

Total	$	629,795	100	%	$	660,687	100	%

A~~ccounting~~Accounting Policy and Performance Obligations

We operate as an omnichannel, family footwear retailer and provide the convenience of shopping at our physical stores or shopping online through our e-commerce platform. As part of our omnichannel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock at a particular store. We also offer “buy online, pick up in store” services for our customers. “Buy online, pick up in store” provides the convenience of local pickup for our customers.

For our physical stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products. This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store. For sales made through our e-commerce platform in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped. This also includes sales made via our Shoes 2U program when the customer chooses home delivery.

We offer our customers sales incentives including coupons, discounts, and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in Cost of sales. Gift card revenue is recognized at the time of redemption. When a customer makes a purchase as part of our rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions.

Transaction Price and Payment Terms

The transaction price is the amount of consideration we expect to receive from our customers and is reduced by any stated promotional discounts at the time of purchase. The transaction price may be variable due to terms that permit customers to exchange or return products for a refund. The implicit contract with the customer reflected in the transaction receipt states the final terms of the sale, including the description, quantity, and price of each product purchased. The customer agrees to a stated price in the contract that does not vary over the term of the contract and may include revenue to offset shipping costs. Taxes imposed by governmental authorities such as sales taxes are excluded from Net sales.

We accept various forms of payment from customers at the point of sale typical for an omnichannel retailer. Payments made for products are generally collected when control passes to the customer, either at the point of sale or at the time the customer order is shipped. For Shoes 2U transactions, customers may order the product at the point of sale. For these transactions, customers pay in advance and unearned revenue is recorded as a contract liability. We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer). Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at ~~April~~July 30, 2022, January 29, 2022 or ~~May 1,~~July 31, 2021.

Returns and Refunds

We have established an allowance based upon historical experience in order to estimate return and refund transactions. This allowance is recorded as a reduction in sales with a corresponding refund liability recorded in Accrued and other liabilities. The estimated cost of

merchandise inventory is recorded as a reduction to Cost of sales and an increase in Merchandise inventories. Approximately $884,000 of refund liabilities and $516,000 ofof right of return assets associated with estimated product returns were recorded in Accrued and other liabilities as of ~~April~~July 30, 2022 and January 29, 2022. Approximately $740,000 of refund liabilities and $495,000 of right of return assets associated with estimated product returns were recorded in Accrued and other liabilities at ~~May 1,~~July 31, 2021.

Contract Liabilities

The issuance of a gift card is recorded as an increase to contract liabilities and a decrease to contract liabilities when a customer redeems a gift card. Estimated breakage is determined based on historical breakage percentages and recognized as revenue based on expected gift card usage. We do not record breakage revenue when escheat liability to relevant jurisdictions exists. At ~~April~~July 30, 2022, January 29, 2022 and ~~May 1,~~July 31, 2021, ~~approximately~~approximately $2.0 million, $2.3 million and $~~1.4~~1.5 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and other liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two years. Breakage revenue associated with our gift cards of $~~59,000~~49,000 and $~~42,000~~108,000 was recognized in Net sales during the thirteen and twenty-six weeks ended ~~April~~July 30, 2022, respectively. Breakage revenue associated with our gift cards of $38,000and ~~May 1,~~$80,000 was recognized in Net sales during the thirteen and twenty-six weeks ended July 31, 2021, respectively.

Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards. Points under Shoe Perks are earned primarily by making purchases through any of our omnichannel points of sale. Once a certain threshold of accumulated points is reached, the customer earns a reward certificate, which is redeemable through any of our sales channels.

When a Shoe Perks customer makes a purchase, we allocate the transaction price between the goods purchased and the loyalty reward points earned based on the relative standalone selling price. The portion allocated to the points program is recorded as a contract liability for rewards that are expected to be redeemed. We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates. During ~~each of~~ the thirteen and twenty-six weeks ended ~~April~~July 30, 2022, ~~and May 1, 2021,~~ approximately $1.3 million and $2.6 million, respectively, of loyalty rewards were recognized in Net sales. During the thirteen and twenty-six weeks ended July 31, 2021, approximately $1.6 million and $2.9 million, respectively, of loyalty rewards were recognized in Net sales. At ~~April~~July 30, 2022, January 29, 2022 and ~~May 1,~~July 31, 2021, ~~approximately~~approximately $~~849,000~~889,000, $852,000 and $1.1 million of contract liabilities associated with loyalty rewards were recorded in Accrued and other liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.

Note 7 – Leases

We lease all of our physical stores, our single distribution center, which has a current lease term expiring in 2034, and certain other locations that support the recently acquired Shoe Station operations. We also enter into leases of equipment, copiers and billboards. All of our leases are operating leases. Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of ~~April~~July 30, 2022.

Lease costs, including related common area maintenance (“CAM”), property taxes, and insurance, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and twenty-six weeks ended ~~April~~July 30, 2022 and ~~May 1,~~July 31, 2021:


					Thirteen Weeks		Thirteen Weeks		Twenty-six		Twenty-six
	Thirteen Weeks		Thirteen Weeks		Weeks Ended		Weeks Ended		Weeks Ended		Weeks Ended
(In thousands)	Ended April 30, 2022		Ended May 1, 2021		July 30, 2022		July 31, 2021		July 30, 2022		July 31, 2021
Operating lease cost	$	14,699	$	13,263	$	14,943	$	13,489	$	29,642	$	26,752
Variable lease cost
CAM, property taxes and insurance		4,761		4,768		4,667		4,861		9,429		9,629
Percentage rent and other variable lease costs		193		648		301		993		494		1,641
Total	$	19,653	$	18,679	$	19,911	$	19,343	$	39,565	$	38,022

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q 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; the duration and spread of the COVID-19 pandemic, mitigating efforts deployed, including the effects of government stimulus on consumer spending, and the pandemic’s overall impact on our operations, including our stores, supply chain and distribution processes, economic conditions, and financial market volatility; our ability to operate the recently acquired Shoe Station assets, retain Shoe Station employees and achieve expected operating results, synergies, and other benefits from the Shoe Station acquisition within expected time frames, or at all; risks that the Shoe Station acquisition may disrupt our current plans and operations or negatively impact our relationship with our vendors and other suppliers; 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 and Puerto Rico where our stores are 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; 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 platform and to successfully grow our omnichannel sales; the effectiveness of our inventory management, including our ability to manage key merchandise vendor relationships and emerging direct-to-consumer initiatives; changes in our relationships with other key suppliers; 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 impact of natural disasters, other public health crises, political crises, civil unrest, and other catastrophic events on our operations 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 cybersecurity breach; 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; future stock repurchases under our stock repurchase program and future dividend ~~payments~~.payments. For a m~~ore~~more detailed discussion of risk factors impacting us, see the “Risk ~~Factors��~~Factors” section of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 as filed with the SEC. This section of this Quarterly Report on Form 10-Q generally discusses our results for the ~~first~~second quarter 2022 and the ~~first~~second quarter 2021 and year-over-year comparisons between the ~~first~~second quarter 2022 and the ~~first~~second quarter ~~2021.~~2021, as well as year-to-date results between the two periods. However, 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 the ~~first~~second quarter 2022 and the ~~first~~second quarter 2019 and respective year-to-date periods to provide further context regarding our ~~first~~second quarter and year-to-date 2022 results of operations.

Referred to herein, the ~~first~~second quarter 2022 is the thirteen weeks ended ~~April~~July 30, 2022; the ~~first~~second quarter 2021 is the thirteen weeks ended ~~May 1,~~July 31, 2021; ~~the first quarter 2020 is the thirteen weeks ended May 2, 2020;~~ and the ~~first~~second quarter 2019 is the thirteen weeks ended ~~May 4,~~August 3, 2019. Also referred to herein, year-to-date 2022 is the twenty-six weeks ended July 30, 2022; year-to-date 2021 is the twenty-six weeks ended July 31, 2021; and year-to-date 2019 is the twenty-six weeks ended August 3, 2019.

Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers. After our acquisition of the physical stores and substantially all of the assets and liabilities of Shoe Station, Inc. ~~("Shoe Station")~~ 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 and private label 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 through direct-ship arrangements with certain vendors.

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. Certain of our Shoe Carnival stores have athletic shops that highlight leading athletic brands, and we expect to continue growing our "athletic shop" in-store concept and other shop-in-shop concepts across our fleet in the years ahead.

The addition of the Shoe Station banner and retail locations creates a complementary retail platform to serve a broader family footwear customer base across 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. See Note 2 — “Acquisition of Shoe Station” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q and Note 3 — “Acquisition of Shoe Station” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, for further discussion.

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.

We use judgment in reporting our financial results. This judgment involves estimates based in part on our historical experience and incorporates the impact of the current general economic climate and company-specific circumstances. However, because future events and economic conditions are inherently uncertain, our actual results could differ materially from these estimates. Our accounting policies that require more significant judgments include those with respect to merchandise inventories, valuation of long-lived assets, accounting for business combinations, leases, and income taxes. The accounting policies that require more significant judgment are discussed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, and there have been no material changes to those critical accounting policies.


	Number of Stores								Store Square Footage								Number of Stores								Store Square Footage
	Beginning						End of		Net			End		Comparable			Beginning						End of		Net			End		Comparable
Quarter Ended	Of Period		Opened		Closed		Period		Change			of Period		Store Sales(1)			Of Period		Opened		Closed		Period		Change			of Period		Store Sales(1)
April 30, 2022		393		2		0		395		31,000			4,450,000		(10.6	)%		393		2		0		395		31,000			4,450,000		(10.6	)%
July 30, 2022																		395		0		0		395		0			4,450,000		(13.8	)%

Year-to-date																		393		2		0		395		31,000			4,450,000		(12.2	)%

May 1, 2021		383		0		6		377		(46,000	)		4,100,000		125.8	%		383		0		6		377		(46,000	)		4,100,000		125.8	%
July 31, 2021																		377		1		0		378		12,000			4,112,000		11.4	%

Year-to-date																		383		1		6		378		(34,000	)		4,112,000		48.8	%

The following table sets forth our results of operations expressed as a percentage of ~~net~~Net sales for the periods indicated:

The shares outstanding and net income per share information for the first quarter of 2021 throughout this MD&A has been adjusted retroactively as a result of a two-for-one stock split of the outstanding shares of our common stock held by shareholders of record on July 6, 2021 that was completed on July 19, 2021. See Note 1 — “Basis of Presentation” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for additional information on the stock split.

Executive Summary for the ~~First Fiscal~~Second Quarter Ended ~~April~~July 30, 2022

During the first quarter 2022, our customers shopped for footwear without the pandemic-related government stimulus received in 2021 and without the pandemic-related retail store closures experienced in 2020. Our customers returned to a more normal, pre-pandemic shopping pattern, with the mix of sales being more balanced between the athletic and non-athletic categories. Our first quarter 2022 results demonstrated the structural profit transformation and increased scale our strategic plans have achieved compared to pre-pandemic results. This quarter we continued to achieve gross profit margins in the mid-thirties, double-digit operating income margin and trailing twelve-month store productivity above $300 per square foot, despite the current economic headwinds and continuing global uncertainty.

For the ~~first~~second quarter 2022, diluted net income per share was ~~$0.95,~~$1.04, the second highest ~~first~~second quarter in our history and only surpassed by the ~~stimulus-enhanced first~~second quarter 2021. The ~~$0.95~~$1.04 per diluted share earned was more than double the amount earned pre-pandemic in the ~~first~~second quarter ~~2019.~~ 2019, and the $1.99 per share earned year-to-date 2022 is greater than any full year earnings in our 44 years of operation except for last year.

Net sales in the ~~first~~second quarter 2022 were ~~$317.5 million. Excluding the stimulus-enhanced first quarter 2021, the first quarter 2022 net sales~~$312.3 million and were also the highest second quarter Net sales in our history ~~surpassing any other first quarter by more than 20%. As an indicator of the strength of~~except for last year. In a challenging economic environment, our ~~first~~second quarter 2022 ~~results against the pre-pandemic first quarter 2019, net~~Net sales increased ~~25.1%~~16.4% and comparable store sales increased ~~16.8%.~~8.0% compared to the pre-pandemic second quarter 2019. Our physical store comparable store sales increased ~~9.1%~~4.2% and e-commerce ~~net~~Net sales increased ~~154.4%.~~75.3% compared to second quarter 2019.

Our ~~first~~second quarter 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 customer ~~base~~base. Gross profit margin during the second quarter 2022 was 36.2%, a 560 basis point increase compared to the second quarter 2019, due primarily to enhancements to our customer relationship management capabilities and promotional strategies which increased average selling prices. This was the ~~transformation~~primary driver for the comparable store sales increase and was partially offset by increased transportation and fuel costs. Shoe Station bannered stores contributed Net sales of ~~our gross profit margin.~~$27.2 million in the quarter and $53.4 million year-to-date. During the quarter we ~~surpassed 29 million~~continued growing our Shoe Perks loyalty program members. The 29.7 million Shoe Perks members ~~representing~~as of July 30, 2022 represented an increase in new customers of ~~10%~~6.9% compared to the ~~first~~second quarter 2021 and ~~growth of over 25%~~28.0% compared to the ~~first~~second quarter 2019. Gross profit margin during the first quarter 2022 was 35.5%, a near 600 basis point increase compared to the first quarter 2019, driven primarily by changes to our customer relationship management and promotional strategies, offset by increased transportation and fuel costs.

Compared to the ~~stimulus-enhanced first~~second quarter 2021, ~~net~~Net sales were down ~~3.3%~~6.0% and comparable store sales declined ~~10.6%. These results~~13.8% due to lower traffic and sales volume. This decrease was due primarily to fluctuations in our customer base's discretionary income as impacted by government stimulus in 2021 and inflation in 2022 and continued COVID-19-related manufacturing and supply chain disruptions decreasing the availability of athletic inventory in 2022. Lower athletic inventory levels contributed to the decrease in comparable store athletic sales in the quarter. Comparable store athletic sales were down 25.6% compared to ~~a net sales increase of 122.7%~~2021 and down 12.9% compared to 2019. On a comparable store basis, non-athletic sales ~~increase of 125.8%~~decreased 1.9% compared to 2021 and increased 30.8% compared to 2019. Net sales attributed to athletic sales were 40% in the ~~first~~second quarter 2022, compared to 47% in the second quarter 2021 ~~compared to~~and 50% in the ~~first~~second quarter ~~2020 when our stores were closed for about half of the quarter. Due to the current global supply chain issues and inflation, we~~2019.

We also incurred ~~significantly~~ higher transportation and fuel costs in the ~~first~~second quarter 2022 compared to the ~~first~~second quarter 2021 ~~which reduced our merchandise margin by 150 basis points~~ and ~~increased our distribution costs by 190 basis points. Excluding~~ the ~~150 basis point increase in~~second quarter 2019. The higher transportation and fuel costs reduced our ~~merchandise~~gross profit margin ~~would have increased in the first quarter 2022~~by 270 basis points compared to the ~~first~~second quarter ~~2021. Also~~2021 and by 300 basis points compared to the ~~first~~second quarter ~~2021, these additional costs decreased our diluted net income per share by $0.29.~~2019.

We ended the ~~first~~second quarter 2022 with ~~inventory~~Inventory of ~~$345.0~~$385.5 million, an increase of ~~$76.4~~$48.6 million ~~compared to~~over the ~~first~~second quarter ~~2021, or 22.6% on a per store basis. The majority~~2019. Approximately 59% of the increase ~~was due to accelerated receipts of merchandise in an effort to mitigate supply chain issues~~is inventory for the ~~back-to-school shopping period, and approximately 40%~~Shoe Station stores acquired last year or opened this year. The 14.4% increase in Inventory is supportive of the 20.6% increase ~~was due~~in Net sales year-to-date 2022 compared to year-to-date 2019 and the ~~addition~~expectation of ~~Shoe Station stores.~~increases in Net sales compared to 2019 for the remainder of the fiscal year.

We had no borrowings outstanding under our credit facility, which was amended and restated during the first quarter 2022, and we ended the ~~first~~second quarter 2022 with ~~$97.1~~$62.6 million of cash, cash equivalents and marketable securities. Our new credit facility expires on March 23, 2027.

We are currently in the process of modernizing our stores and plan to have over 50% of our stores modernized by the summer of 2023 and the full program complete by the end of fiscal 2024. ~~Through the first quarter 2022, 31% of the fleet is complete.~~

Two new stores were opened in ~~the first quarter~~year-to-date 2022 and no stores were closed. ~~We aim~~Store count is on track to ~~open approximately 10 new stores in fiscal 2022 and expect no store closures and for store count to exceed~~reach 400 stores by the end of fiscal 2022. No store closures during fiscal 2022 are anticipated.

Results of Operations for the ~~First~~Second Quarter Ended ~~April~~July 30, 2022 Compared to the ~~First~~Second Quarter Ended ~~May 1,~~July 31, 2021

Net sales were ~~$317.5~~$312.3 million during the ~~first~~second quarter 2022 and decreased ~~3.3%~~6.0% compared to the ~~first~~second quarter 2021. The ~~change~~decrease in ~~net~~Net sales was primarily athe result of a ~~10.6%~~13.8% comparable store sales decline due ~~primarily~~largely to ~~the impact of government stimulus dollars~~fluctuations in the ~~first~~discretionary income of our customer base and reduced availability of athletic shoes in the second quarter ~~2021~~2022, partially offset by ~~revenues~~Net sales attributable to new stores, ~~including~~mostly the Shoe Station stores. E-commerce sales were approximately ~~11%~~9% of merchandise sales in the ~~first~~second quarter 2022, compared to ~~12%~~10% in the ~~first~~second quarter 2021.

Gross profit was ~~$112.9~~$113.1 million during the ~~first~~second quarter 2022, a decrease of ~~$17.3~~$22.6 million compared to the ~~first~~second quarter 2021. Gross profit margin in the ~~first~~second quarter 2022 was ~~35.5%~~36.2% compared to ~~39.6%~~40.9% in the ~~first~~second quarter 2021. Merchandise margin decreased ~~1.3%~~2.8 percentage points and buying, distribution and occupancy costs increased ~~2.8%~~1.8 percentage points as a percentage of ~~net~~Net sales compared to the ~~first~~second quarter 2021. ~~The~~These changes were primarily athe result of the impact of inflation on transportation and fuel costs, other merchandise cost increases and the de-leveraging of other buying, distribution and occupancy costs due to lower Net sales in the ~~first~~second quarter 2022.

SG&A ~~increased $4.9~~decreased $1.7 million in the ~~first~~second quarter 2022 to ~~$77.5~~$74.3 million compared to ~~$72.6~~$76.0 million in the ~~first~~second quarter 2021. The ~~overall increase in SG&A during the first quarter 2022~~decrease was primarily attributable to ~~continued investment in advertising and store level wages,~~reduced incentive compensation expense as a result of maximum performance achieved last year, partially offset by ~~lower levels of incentive compensation.~~increased depreciation expense resulting from investment in property and equipment related to our store portfolio modernization plan. As a percentage of ~~net~~Net sales, SG&A was ~~24.4%~~23.8% in the ~~first~~second quarter 2022 compared to ~~22.1%~~22.9% in the ~~first~~second quarter 2021.

The effective income tax rate for the ~~first~~second quarter 2022 was ~~23.8%~~25.6% compared to ~~24.8%~~25.8% for the ~~first~~second quarter 2021. Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events. ~~The lower quarterly effective tax rate was primarily due to a lower level of expected non-deductible compensation in fiscal 2022.~~ For the full 2022 fiscal year, we expect our tax rate to be between ~~24%~~25% and ~~25%~~26% compared to the 25.3% effective tax rate recognized during the full 2021 fiscal year.

Results of Operations Year-to-Date Through July 30, 2022 Compared to Year-to-Date Through July 31, 2021

Net sales were $629.8 million in year-to-date 2022, a decrease of 4.7% compared to year-to-date 2021. The decrease in Net sales was primarily the result of a 12.2% comparable store sales decline due largely to fluctuations in the discretionary income of our customer base and reduced availability of athletic shoes in year-to-date 2022, partially offset by Net sales attributable to new stores, mostly the Shoe Station stores. E-commerce sales were approximately 10% of merchandise sales in year-to-date 2022, compared to 11% in year-to-date 2021.

Gross profit was $226.0 million in year-to-date 2022, a decrease of $39.9 million compared to year-to-date 2021. Gross profit margin in year-to-date 2022 was 35.9% compared to 40.3% in year-to-date 2021. Merchandise margin decreased 2.0 percentage points and buying, distribution and occupancy costs increased 2.4 percentage points as a percentage of Net sales compared to year-to-date 2021. These changes were primarily the result of the impact of inflation on transportation and fuel costs, other merchandise cost increases and the de-leveraging of other buying, distribution and occupancy costs due to lower Net sales in year-to-date 2022.

SG&A increased $3.2 million in year-to-date 2022 to $151.8 million compared to $148.6 million in year-to-date 2021. The overall increase in SG&A during year-to-date 2022 was primarily attributable to continued investment in store level wages and advertising and increased depreciation resulting from investment in property and equipment related to our store portfolio modernization plan. The increases were partially offset by lower levels of incentive compensation. As a percentage of Net sales, SG&A was 24.1% in year-to-date 2022 compared to 22.5% in year-to-date 2021.

The effective income tax rate for year-to-date 2022 was 24.8% compared to 25.3% for year-to-date 2021.

Our primary sources of liquidity are ~~$97.1~~$62.6 million of cash, cash equivalents and marketable securities on hand at the end of the ~~first~~second quarter 2022, cash generated from operations and availability under our $100 million credit facility. While the effects of the COVID-19 pandemic and other economic uncertainty associated with inflation, constrained supply chains and the Eastern European conflict, among other macroeconomic uncertainty, make our operating cash flow less predictable, we believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are normally for working capital, which are principally inventory purchases, investments in our stores, such as new stores, remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program and the financing of capital projects, including investments in new systems. As part of our growth strategy, we may also pursue strategic acquisitions of other footwear retailers.

Net cash generated from operating activities was ~~$17.7~~$8.9 million in ~~the first quarter~~year-to-date 2022 compared to ~~$76.5~~$79.8 million during ~~the first quarter~~year-to-date 2021. The change in operating cash flow was primarily driven by increased earnings in ~~the first quarter~~year-to-date 2021 and timing of inventory purchases.

Working capital ~~increased~~decreased on a year-over-year basis and totaled ~~$271.8~~$287.7 million at ~~April~~July 30, 2022 compared to ~~$262.3~~$298.7 million at ~~May 1,~~July 31, 2021. The ~~increase~~decrease was primarily attributable to ~~higher merchandise inventory levels offset by~~ lower cash balances due to the acquisition of Shoe Station in December 2021 and share ~~repurchases.~~repurchases, partially offset by higher merchandise inventory levels. Our current ratio was ~~2.4~~2.5 as of ~~April~~July 30, 2022 ~~compared to 2.3 as of May 1,~~and July 31, 2021.

Our cash outflows for investing activities are normally for capital expenditures. During ~~the first quarters of~~year-to-date 2022 and 2021, we expended ~~$26.9~~$50.2 million and ~~$4.1~~$12.1 million, respectively, for the purchase of property and equipment, primarily related to our store portfolio modernization plan.

We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our nonqualified deferred compensation plan. The balance of these marketable securities was $11.0 million at ~~April~~July 30, 2022. Additional information can be found in Note 4 — “Fair Value Measurements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

Our cash outflows for financing activities are typically for cash dividend payments, share repurchases or payments on our credit facility. Shares of our common stock can be either acquired as part of a publicly announced repurchase program or withheld by us in connection with employee payroll tax withholding upon the vesting of stock-based compensation awards that are settled in shares. Our cash inflows from financing activities generally reflect stock issuances to employees under our Employee Stock Purchase Plan and borrowings under our credit facility.

During ~~the first quarter~~year-to-date 2022, net cash used in financing activities was ~~$25.1~~$27.6 million compared to ~~$4.3~~$10.3 million during ~~the first quarter~~year-to-date 2021. The increase in net cash used in financing activities was primarily due to the repurchase of $20.5 million of shares in year-to-date 2022, compared to the ~~first quarter 2022~~repurchase of $4.0 million of shares in year-to-date 2021, associated with our Board of Directors’ authorized share repurchase ~~program.~~program .

Capital expenditures for fiscal 2022, including actual expenditures in ~~the first quarter~~year-to-date 2022, , are expected to be between ~~$55~~$63 million and ~~$65~~$73 million, with approximately ~~$50~~$53 million to ~~$55~~$58 million to be used for new stores, relocations and remodels and approximately $5 $10

million to ~~$10~~$15 million for upgrades to our e-commerce platform, various other store improvements, continued investments in technology and normal asset replacement activities. The resources allocated to these projects are subject to near-term changes depending on the impacts associated with COVID-19, ongoing supply chain disruptions, and other macroeconomic uncertainty. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, the number of stores relocated, the amount of lease incentives, if any, received from landlords and the number of stores remodeled. The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.

We opened one Shoe Carnival branded store and one Shoe Station branded store in ~~the first quarter~~year-to-date 2022. Increasing market penetration by adding new stores is a key component of our growth strategy. ~~Through a combination~~We are on track to achieve 400 stores by the end of ~~both organic~~fiscal 2022 and ~~acquired store growth, we~~ aim to add ~~approximately 10 new stores in fiscal 2022,~~ over 20 new stores in fiscal 2023 and over 25 new stores annually by fiscal 2024, across both banners. These store objectives will be accomplished through a combination of both organic and acquired store growth. We believe our current store footprint provides for growth in new markets within the United States as well as fill-in opportunities within existing markets. In the near term, we expect to pursue fill-in opportunities for store growth across large and mid-size markets as we continue to leverage customer data from our customer relationship management program. We believe more attractive real estate options will be available with the addition of the Shoe Station retail concept to our portfolio. However, our future store growth may continue to be impacted by the COVID-19 pandemic and other macroeconomic uncertainty.

Over the last several years, we performed a store rationalization and performance improvement plan. As part of the plan, which is now complete, we identified underperforming stores and worked to address the performance of these stores through renegotiation of lease terms, relocation or closure. While we continue to actively monitor the store portfolio, we do not expect any further significant closures over the next several years.

On March 23, 2022, we entered into a new $100 million Amended and Restated Credit Agreement (the “New Credit Agreement”), which replaced our existing credit agreement. The New Credit Agreement is collateralized by our inventory, expires on March 23, 2027, and uses a Secured Overnight Financing Rate ("SOFR") as quoted by The Federal Reserve Bank of New York as the basis for financing charges. Material covenants associated with the New Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0. We were in compliance with these covenants as of ~~April~~July 30, 2022.

The New Credit Agreement contains certain restrictions. However, as long as our consolidated EBITDA is positive and there are either no or low borrowings outstanding, we expect these restrictions would have no impact on our ability to pay cash dividends, execute share

repurchases or facilitate acquisitions from cash on hand. The New 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 make acquisitions and pay cash dividends or repurchase shares in excess of $15 million in a fiscal year provided that (a) no default or event of default exists before and immediately after the transaction 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. Among other restrictions, the New Credit Agreement also limits our ability to incur additional secured or unsecured debt to $20 million.

The New Credit Agreement bears interest, at our option, at (1) the agent bank’s base rate plus 0.0% to 1.0% or (2) Adjusted Term SOFR plus 0.9% to 1.9%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment. During ~~the first quarter~~year-to-date 2022, we did not borrow or repay funds under our prior credit facility or the New Credit Agreement. Letters of credit outstanding were $700,000 at ~~April~~July 30, 2022 and our borrowing capacity was $99.3 million.

The terms “net worth”, “consolidated interest coverage ratio”, “consolidated funded indebtedness”, “consolidated rental expense”, “consolidated EBITDA”, “base rate” and “Adjusted Term SOFR” are defined in the New Credit Agreement.

On ~~March 10,~~June 23, 2022, the Board of Directors approved the payment of a ~~first~~second quarter 2022 cash dividend to our shareholders. The quarterly cash dividend of $0.090 per share was paid on ~~April 18,~~July 25, 2022 to shareholders of record as of the close of business on ~~April 4,~~July 11, 2022. In the ~~first~~second quarter 2021, the dividend paid was $0.070 per share. During the first ~~quarters~~half of 2022 and 2021, we returned ~~$2.6~~$5.1 million and ~~$2.1~~$4.0 million, respectively, to our shareholders through our quarterly cash dividends.

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, subject to restrictions as outlined above in the “Credit Facility” discussion. See Note 9 — “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 for a further discussion of our credit facility.

On December 16, 2021, our Board of Directors authorized a share repurchase program for up to $50.0 million of outstanding common stock, effective January 1, 2022 (the “2022 Share Repurchase Program”). The purchases may be made in the open market or through privately negotiated transactions from time-to-time through December 31, 2022 and in accordance with applicable laws, rules and regulations. The 2022 Share Repurchase Program may be amended, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock. We have funded, and intend to continue to fund, share repurchases from cash on hand, and any shares acquired will be available for stock-based compensation awards and other corporate purposes. The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market and economic factors and are subject to restrictions as outlined above in the “Credit Facility” discussion. See Note 9 — “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 for a further discussion of our credit facility.

No shares were repurchased during the second quarter of 2022 under the 2022 Share Repurchase Program. During ~~the first quarter~~year-to-date 2022, we repurchased 682,886 shares of common stock at a total cost of $20.5 million under the 2022 Share Repurchase Program. As of ~~April~~July 30, 2022, we had $29.5 million available for future repurchases. Due to uncertainty related to the COVID-19 pandemic, share repurchases were limited in fiscal 2021. In year-to-date 2021, ~~and no repurchases were made in the first quarter 2021.~~we repurchased 117,068 shares of common stock at a total cost of $4.0 million.

We have three distinct peak selling periods: Easter, back-to-school and Christmas. Our operating results depend significantly upon the sales generated during these periods. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year. Any unanticipated decrease in demand for our products or a supply chain disruption that reduces inventory availability during these peak shopping seasons in future periods could reduce our ~~net~~Net sales and gross profit and negatively affect our profitability.

We are exposed to market risk in that the interest payable under our credit facility is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We had no borrowings outstanding during the ~~first~~second quarter 2022.

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of ~~April~~July 30, 2022, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities of Shoe Station, a privately held, family-owned shoe retailer. Under the rules and regulations of the ~~Securities and Exchange Commission,~~SEC, we elected to exclude Shoe Station during the year ended January 29, 2022 from management's assessment of the effectiveness of our internal control over financial reporting as of January 29, 2022. In our Annual Report on Form 10-K for the year ending January 28, 2023, management and our independent registered public accounting firm will be required to provide an assessment as to the effectiveness of our internal control over financial reporting, inclusive of the acquired assets of Shoe Station.

There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended ~~April~~July 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed, on its behalf by the undersigned thereunto duly authorized.


☒		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the quarterly period ended ~~April~~July 30, 2022
or
☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from to


Commission File Number:	0-21360

Shoe Carnival, Inc.
(Exact name of registrant as specified in its charter)


Indiana		35-1736614
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

7500 East Columbia Street Evansville, IN		47715
(Address of principal executive offices)		(Zip code)


☐ Large accelerated filer	☒ Accelerated filer	☐ Non-accelerated filer	☐ Smaller reporting company	☐ Emerging growth company


			Page
Part I	Financial Information

	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Income	4
		Condensed Consolidated Statements of Shareholders’ Equity	5
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1314

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1920

	Item 4.	Controls and Procedures	1920

Part II	Other Information

	Item 1A.	Risk Factors	2021

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2021

	Item 6.	Exhibits	2122

	Signature		2223


(In thousands)	Thirteen Weeks Ended April 30, 2022				Thirteen Weeks Ended May 1, 2021
Non-Athletics:
Women’s	$	88,554	28	%	$	75,531	23	%
Men’s		49,152	15			44,282	13
Children’s		21,405	7			23,293	7
Total		159,111	50			143,106	43

Athletics:
Women’s		51,034	16			58,595	18
Men’s		53,026	17			65,724	20
Children’s		36,731	11			42,578	13
Total		140,791	44			166,897	51

Accessories		15,752	5			16,627	5

Other		1,873	1			1,827	1

Total	$	317,527	100	%	$	328,457	100	%


Period	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number Of Shares Purchased as Part of Publicly Announced Programs (2)		Approximate Dollar Value of Shares that May Yet Be Purchased Under Programs (2)
January 30, 2022 to February 26, 2022		0	$	0		0	$	50,000,000
February 27, 2022 to April 2, 2022		481,385	$	30.24		412,990	$	37,493,056
April 3, 2022 to April 30, 2022		269,896	$	29.67		269,896	$	29,485,035
		751,281				682,886


Date: ~~June 3,~~August 31, 2022	SHOE CARNIVAL, INC.
	(Registrant)