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SCVL Shoe Carnival

Participants
Clifton Sifford President and CEO
Kerry Jackson SVP, COO & CFO
Sam Poser Susquehanna
Christopher Svezia Wedbush
Greg Pendy Sidoti
Call transcript
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Operator

Good afternoon and welcome to Shoe Carnival's Third Quarter Fiscal 2017 Earnings Call. Today's call is being recorded. It is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks may contain forward-looking statements that involve a number of risk factors. cause those actual projected could materially to factors from different in risk the results Company's be These such statements.

or any risk be call any Shoe included as statements date. any contained SEC Mr. comments. on these should to factors announce call of discussed Mr. Sifford, of on cautioned not press developments. may in today's statements considered statements, you of undue with release are to over conjunction Sifford, obligation Forward-looking forward-looking publicly reliance to the place the the release. Cliff or President to risk Investors revisions factors press now for events disclaims today's and which in or The filings reflect begin. Company's of and Carnival, forward-looking the Company to the update opening today's earnings in turn to Officer I'll Chief discussion speak conference future today's Executive only

Clifton Sifford

to quarter and you, fiscal Carnival's call. conference welcome Thank earnings XXXX Shoe third

on you XXXX me review we'll our President, Kerry On financial Jackson, Officer. Financial provide today the on update the and call, open is will to Vice I'll and Operating performance give quarter brief questions. today's call overview Chief third a guidance. Senior of then Kerry your an our Executive call the Joining results take

all our across building been digital Over customers the have of several and executing multifaceted the engaging we years, past presence with goal channels.

and experience of they with how initiatives us. shop have on regardless customers Our for choose our fun, focused a memorable been building to exciting

it's to the spend on classification. from our site Shoe SMS and We how a program. Texas, shops, addition latest and the affecting In we to enhance robust via refocus preferred three by marketing of always more experience traffic those have like to hear the digital replatformed We in away impacted venues all traditional the e-commerce have enhanced hurricanes through our year, began experience quarter, and launched for Florida Carnival key text Rico. have and/or brands this we marketing our customers to Puerto which performance program reliability. In store shop about

for was quarter down third traffic the low single digit. Our the only

a selection customer team that mid-single merchant per provided transaction to a our increase increase sales quarter. Puerto most This a exception the great X.X% store to the for digit Each third styles the led with region in with deep reported of sales increase increases the Rico the digit grow important season’s for quarter. of geographic of the and from South in the low store comparable single all conversion. comparable positive Our units North

sales Our experienced a in Puerto store comparable of due Rico Maria. stores to loss teams total devastation in the Hurricane

today, getting store we term in some the project X.X% with I impaired fourth line before remaining year-end. that three down per permanently. with was additional basis, closed have stores The five non-Puerto store of stores the in the As one Rico possibility with stores Rico that open with of fiscal Puerto of of be expectations. you the the inventory a will open a seven ended XXXX. longer We on remind which our we quarter maybe quarter

inventories the in single store remains plan per down mid with digits. Our year

due last initiative we implementing midst announced on strategy. results will more get BD&O merchandise call EPS transition Kerry CRM result leveraged of on was the We for was our a were basis in The basis costs. to was that remarks. quarter to a SG&A lower margin XX per points XX $X.XX which share, a diluted XX% basis decreased while to his increase detail last percentage as sales. our year. the now of would prepared one holistic I third financial like Our primarily of down points versus selling represents XX number points in XXXX.

We to insights Carnival initiative This leverage model. entire further differential more is are brand. the and instrumental our serve Once the customer-centric final Shoe focusing to organization the better and the will strategy. complete, implementing a customer we customer now of this in stages project is

receive of the our With evolving and customer they them information the aid project in customers. brand engaged shop, ever and loyal Carnival this how to both way the our customers will keeping choose core Shoe acquisition new

high-value enhance to the all loyal to incentivize we the all loyalty will their make to strategy, footwear award choice addition store In Shoe Carnival Shoe our year, to our over for customers purchases. our next Perks, customers program, their of CRM and

the Puerto of are Rico. e-commerce pages third and landing relevant our will process of more ended and with launch us enhance make further in believe we creating vendor will the in new strengthen site in which in we brand We the the in our September, website With in key with addition drop-ship. quarter stores store of marketplace XXXX XX XXX the states our

we market seven Of stores two third two are we in opened are we markets and mid seven in locations small one traditional store. closed and During quarter, stores in serve, three the in opened larger the are the currently quarter, markets.

XX approximately XXXX. stores of during underperforming fourth the quarter fiscal close will We

this EPS. will As improvements in and our volume, improve the we though contribution minimum those to close overall of would stores if realize stores XX we stated have our XX sales reduce and call an that last identified XXXX, performance we fiscal for our Even operating income would additional expectations. to we cannot long-term

we patience. attractive openings available if to low will single we to be believe landscape digit us, exercise growth in New with store committed the estate term strategic We range. more be brick-and-mortar changing real will long XXXX remain the however opportunities store for and stores,

moment to department. third to our sales by like review I'd quarter Now

digits non-athletic to quarter last low year ended single down the a department basis. women's comparable on Our

This boot to our We boots comparable as store quarter. of school. women's comparable as shoes Children's with with single the receipts back high for broad-based boots. slow out pleased increase expected, increased casual ended As single up saw and our in sales a categories later The men's quarter got mid non-athletic results department off dress, digits on the and up in sport athletic start sandals was for quarter. the digits positive were we were a sandal expand basis. we to

items Our merchant job for an cannot in they the our proud right period. from the for of back-to-school right team quarter. mid having sales. providing single needed identifying for athletic I time time styles outstanding brands our up be on depth to was comparable Adult team our and the the athletics the drive more the merchants' and basis stores of of did kids periods back-to-school adult our digits key a

of our the a remainder give I'd on fiscal Now XXXX. expectations like for to color little

and excited of in believe have third dollars athleisure in are results and about this exceptional channel specific quarter. our trend footwear happening We those to We categories inventory will take athletic the trend. continue the the family advantage fall for to reallocated we the season positive

are we our on our call, be have this plans to quarter Day. stated decided last not promotional we As fourth stores year, on the Thanksgiving open that last to than less to point and

Although margins have will expect this to on merchandise impact product. strategy an experience on seasonal we the sales, higher

sales in as which stores be quarter, closing through the comparable mentioned digits. will inventory flat those on to billion for expect However date X.XX expectations to owned clear X.XX stores. store merchandise up net to fourth during quarter the XXXX these of be to billion XX performance sales low we we’ll fiscal Based in with range single our earlier, as impact we and the the margins approximately I

quarter. compared include with has year, estimates of to of We on guidance to $X.XX $X.XX to to have high of quarter our the bear net our raised I about earnings this the week earnings quarter. weeks SG&A $XX store effect that $XX the fourth fourth week in sales the to XX share fourth sales. expectation sales share included the not compared per like the previous the our slightly now will will diluted million while prior would mind in the for the expect year to in quarter last profit slightly in earnings $X.XX. year now be and worth an gross a the in turn full Kerry. quarter decreasing of over diluted percentage is $X.XX The per as weeks fourth BD&O the and income that calculation Please down we extra comparable end extra at call million margin immaterial for is expect guidance, of with XX cost Included

Kerry Jackson

Thank you, Cliff.

in stores the the loss sales in fiscal closed new the million net sales Of to by in from year. million million stores quarter of compared this of increase time. period sales. $XXX.X million increase partially $XX.X the of $X.X generated sales store third million beginning XX Third $XX.X We same opened XX a offset sales, comparable of increased quarter of from to since XXXX, over quarter the to X.X% the the last net was attributable $X.X in third

gross due last the The year. during decrease to margin points sold sales. quarter merchandize more was the our buying points was of XX.X% decrease XX.X% of This quarter. the offset the in basis the expenses quarter for merchandized by partially as an majority in a being merchandise of shift occupancy decrease percentage profit the a to margin decrease driven XX Our by in margin and distribution basis during was promotional the XX quarter compared third in

margin so a and in footwear is increased million. have quarter third women's typically to As which is we due as quarter was expenses third athletic same-store in leveraging million the for The expenses the percentage year. category sales. is of cost Cliff primarily sales the or lowest occupancy will occupancy XXXX the the lower typically in sold occupancy fewer of the fiscal highest mentioned of last effect earlier, boots which quarter. close to in combined the quarter the category during decrease higher and primarily from The the stores SG&A we closed $XX.X since decrease $X.X margin third quarter more cost distribution

third stores XXX,XXX. decreased the QX the XX.X% stores same income both both XX.X% new period in third to and XXXX closed compared was tax to XXXX in last More to sales expense the third SG&A and year. rate third in year. in and third our seven quarter year. the sales, related in three CRM XXXX. in quarter percentage the third QX of cost and a to quarter fiscal to compared new in SG&A fiscal quarter overall stores quarter. last XXXX fiscal of The included of plan, opened of year of this store the in Preopening fiscal of of We last costs more XXX,XXX effective in in expense quarter offset The for to Included our primarily due fiscal XX.X% third were $XXX,XXX increases by fees incentive $XXX,XXX to of was savings decreased XXXX. XX.X% initiative, the the compensation, increase sales cost retirement compared cost compared to consulting quarter the of As quarter both partially these closing advertising in during SG&A expenses

be For fiscal rate year the XXXX, of expect we tax approximately full XX.X%. to our

shares earnings XX% share share X.X we net average per end quarter or quarter had Weighted XX% or diluted million X% of earnings year, $X.XX. at the earnings Total million outstanding and to outstanding of XX,XXX,XXX to QX last shares. XX.X QX QX year. million this were diluted the last Third $X.XX. for per X.X decreased from shares decreased earnings of shares were year In net increased

the off paid repurchase beginning largest turning on is our quarter common affecting our the we XXX,XXX. we non-recurring of at information third desire stock line fourth after In quarter. the in quarter. of quarter at repurchased The the further of shares the limit cost balance Now our to position share year, the total cash cash this cash quarter, to our typically of a Due borrowings generating during flow. XX,XXX outstanding we third credit

the XX $XX in relocations comment million the into million during expected X.X XXXX. factors for still fourth the of Lease incentives expenditures be to XX to of with week little the the XXXX with is million in anticipated in million last Depreciation year fiscal used fiscal the be To approximately million was to one quarterly My fourth open could play repurchase available quarter quarter our the XX authorization be to did X million million million, nine spend in expense stores, a we million XX XXXX. perspective are decision it be on for flow XX when XXXX. shares new remodels. quarter, for expenditures in fiscal and the third the be for Capital in borrowings. fiscal the $XX to discuss under the months projected year. shift today XXXX, Depreciation than later multiple While to cash add year. Due are is and XX-week share the repurchase full year fact the cash including of expense actual we calendar market. in the year, in that approximately is fiscal no will a the approximately to calendar and remaining XXXX fiscal first

the million. the the fiscal me Let next sales sales accelerated the significantly? and dates, net While sales most apparent by July estimated year our having the financial quarter ended XXXX less XX.X by estimated QX, quarters and our XX XX.X QX and our This sales of end second those XXXX million week second to This calendar the QX to million, by will the in affected we quarter second calendar one Due on sales decrease QX the million. increased in explain. XXXX million increased $XX year. into increased out is are August week calendar sales shifts an sales first was million year, next million were very $XX in review. to weeks affect reduce QX and during by to shift QX, XX these QX and QX restated XX The XXXX of back-to-school XXth to and thereby on an sales ending pulling shifts If quarter X.X be by the Xth concludes to been reflect would XXXX, for back-to-school in week,

Now, for open I'd like call up to the questions.

Operator

go please Sam we will And Poser Susquehanna, Instructions] our question from ahead. first from [Operator take

Sam Poser

and about conversion. the those then of -- which could but way the sort more -- people was and helped happened I your back the right up to states traffic the The would in because Is hurricane in about of comp make that August went how the in with the the What that the impact. arguably in just those came states way how bought The question traffic? and traffic the hurricane assume September think hurricane traffic, impacted? that those down

Clifton Sifford

Florida so period, hurricane The have time right it back-to-school right after Texas in time back-to-school and the the actually period. impact did impacted Florida at an

out close have was -- were The did and store some on the traffic to an percentage then however impact of it impact were other. one we Rico. close quite that how largest So traffic. we get able time for Puerto in were on and We long the

the we remain closed at least So yet have other not that for a opened week, then obviously. stores and

Sam Poser

guess hurricane in even sales I offset question the couldn’t or Texas. simply the your traffic? like and up lot, you those didn't in Florida if up is did go the Did post pick up markets traffic way a pick conversion

Clifton Sifford

it the flooding, Wherever there's Sam you good there in a to think got a -- best flooding the after about tailwind way hurricane wherever hurricane. is pretty was

after the pick flooding. up market. lot back-to-school was because Houston So in much Florida so did and sales of was again it a not the significantly the in Not there market

Sam Poser

talked or to you store of next would the rate you to how sort year's you Is XX be be that year as fact stores? have, the like a this run a a target you good to number next have sort openings what wanted back you like and What of year stores to when that -- low will store And is again. you despite we, to lower? think see number going get opening, then about digit opening open when single opened

Clifton Sifford

the believe that's real and between estate I once stores is settles an terrific think number. XX we XX a I number excellent -- down,

Sam Poser

next next you to you the of view get now the you batch foresee than do what you of year? XX And this XX see as stores sort just foresee closing this I foresee to expect as another where is Do XX mean, years? that And do is that you that XX-ish or beyond happen post happening, year? close you next, next something to XX we're or year between the this more in

Clifton Sifford

hope stores the we hold from with our We now of we talk different economy believe are some one we strategy, Sam, from fourth stores in but not beyond. hope them hope these benefitted to quarter what and we benefit do the a our quarter in and some believe about that we're going that things, these realized of lot the of to XX not we've really is 'XX, will what right if underperforming -- see the to XX seen hold of customer third and that has prepared

So really prepared about not we to are 'XX. yet talk

So looking after I think year. we XX the concentrate strictly are to stores that XX we on next

Sam Poser

next does stores close you like save the may of because -- Kerry, underperforming money to going as as Puerto you the some where Rico I you close what year And -- then gives some this those stores you and closed assume are that the year are I with well.

your mean, point that So of that when does how I on comp happens? as leverage affect the

Clifton Sifford

that we occupancy stores they see say our the cost. just we're type may as change cost next X% comp sales have reaching those may In is down can when out incur higher term that. productivity we of near buying I and overtime the against closing what a stores year you took Well, SG&A our close let's come may percent where low speak as a store, sales, seeing additional you because that and to X% place close

now. closing as else stays overall see we changing but dramatically, So I better see that generally for we a if past give the XX, margin you just help operating stores would don’t will the new margin same, all operating

Sam Poser

pretty about still target you an down on but you numbers your turn? week like Okay. mean want if question look that forward to have? when guess a goal nicely annual your What's supply I inventory we the your at, to then I -- basis, talk Is high. churn? inventory are a What's you your target there is still And are overtime. is

Kerry Jackson

you well Sam turn ex-retail just we long-term That's are overnight. the doesn’t that looking -- really happen there. to just for progress. to not making plan now, and the Right X.X exactly good as is weren’t going get time happen, where we But know,

Sam Poser

mid-term on foresee X.X given that on doing sort And stores a and your that grab be there on mean that theoretically that would a huge I could mean and yourself you I would and mean performing of mind so I assume I would sort you I getting closing mean way are of then that's that ships so you the that plan. overtime? to overtime three and

Kerry Jackson

tough we number have of shoe wouldn’t in number the payers be stores. shift that business to the but it the our of fact a roll e-commerce business in we because that us ship sizes completely because sales our That's of stock, the out from from

Operator

[Operator next Christopher take we Instructions] question Please And from ahead. Wedbush. from will our go Svezia

Christopher Svezia

the I'm was So cadence? up cadence? Or add QX. What you color know roughly I any X. about first curious August was can

maybe September Just and talk about played October out? how

Kerry Jackson

X%. up correctly Yes, were roughly but we X%, not now

Christopher Svezia

Okay.

Kerry Jackson

to for you X% want think didn't We probably Chris. just nine, above up we X.X%, were six, October. I was that were It number. flat

Christopher Svezia

I you hear next actually got if -- X% don’t to X% that that year. you top probably telling know want can so do you

that and quarter cadence remember just you. the in What’s -- What’s the versus for at year? I’ll fourth the So the fourth last curious. quarter, see you I’m

Clifton Sifford

right is now. that pulling Kerry out

Christopher Svezia

talk that got or to really that Okay. is just about out, is done you And get go some 'XX? that for any sprint pulling expect into play? while in when that Is Kerry place CRM to a your starts I give holiday when can or do of initiatives so that color you --

Clifton Sifford

at go in so We're the up to that start ramp. program And look -- XXXX. ’XX, expecting implementation in going but if need ramps long-term be that that, for to -- you it’s of is we’ll early

at years. answer a next loyalty for three over for to we’ll years especially So next the least three we benefit two see program, as

Christopher Svezia

Okay. Kerry.

Kerry Jackson

X.X% the to time we down the back in for came In was keep low Thanksgiving relatively that really around I’m you period. November, comp we us just going quarter. ask and a were single single. and The December decrease flat about. low November, came January gave

Christopher Svezia

brought versus boots And to then, down. to what slower I were to down understand it you the it you season and you planned say just is about in boots late, How trying start of that am when you and say? you talk a much

Clifton Sifford

-- last stay double-digit inventory Yes, I in goal double-digit later We we’ve understand exactly. began our But categories. decline, -- move a October. on categories down planned, and along only inventory of We then from to calls out we plan through the athletic we and non-athletic into and and I brought the boots to door think a boots, move as to as our quarter I in per year. did recover couple it now product move was that stated through of of the dollars all out

So, demand athletic, thing. we athletic the maximize thought could was And or we the where could customer to be. our to did we right elevate exactly going business we

Christopher Svezia

in much October. have Okay. coming How And have boots you later? just I’m have just then that the October? if been different when that of to comp, boots that didn’t you due said -- in curious flat And would fact in is in a it about the flat you later,

Clifton Sifford

standpoint. you're a from comp No -- talking oh, about

Christopher Svezia

comp a yes. From perspective,

Clifton Sifford

I the little did was sale, do us all weather. think with have that warmer. is with to the it about actually October boot a

us, to and product and waiting We By with have not… sell seasonal settled the the we did We athletic issue October. for time get we which weather. becomes And just the products were has October, a a for down demand cool boots. cool

Christopher Svezia

is Is it business boots say to arrived in November, and comps fair the to fair characterization? have that at is because improved a And starting all flow. since it move

Clifton Sifford

characterization. fair a It's

Christopher Svezia

okay bite. answer. Okay, It's don't I can you

So stores to know When last now? are you actually And Kerry answered close year, I the they next ask just to money thing you want -- right going I losing you. you're where just they at if where Are some now? they color add to this stand previously questions do can we that? money point, it. losing actually Or right -- breakeven about they

Kerry Jackson

to you're accelerating close, you cost. start have store the that identified some you Once to going

because they're and a of these, had negative more but the dramatic made losing now store So in the money. accelerated Not seeing of to commitment of us gone they before money, amount are a we're a when we as group. the but they've now to -- positive, store, some slightly expenses prior what a breakeven close

Christopher Svezia

Got Alright. it. Okay.

that just run the Okay, the talked you've offset to to the your post should the XX got thing the being boosting how and about that quarter. liquidation up in is they're margin stores all be because final real inventory, merchandized less but quick. promotional in sales, clearance you fourth of When you

So merchandise for quarter. you a as the our margins fourth today, see it wash

Clifton Sifford

Slightly, slightly down.

Christopher Svezia

Okay.

Clifton Sifford

Yes, we slightly expect [indiscernible] quarter for but overall down. to gross little fix a BD&O still bit, their the be margin

Operator

And question we take from Greg next our Pendy ahead. from Sidoti. Please go

Greg Pendy

just clearance stores you about the as roughly the XX look. be liquidation the as store will year How Is XX that year, mean to for that we the given gross to you're process, double that say fact start the should stores? guess we I next the it I fair year? out closures. XX think we process to use impact targeting thinking guess have be we're impact to just if margin, and going given about the this I closing on that's

Kerry Jackson

Well, it's hard going for be to project. to us

one stores many We have this not closed at time.

many think to on talked get about to fourth we we But twice going to we it, that hurt it's Cliff a the as As on going year. liquidate need much get this and to really we've quarter our margin. through projections and can doing before take how what out prediction through in we need stores made make it's to

Greg Pendy

you a roughly of where product call keep you I really a sort last the think the And last store? is don't of think liquidation as closing it but move you you the same spoke you going be process the Okay, three stores? use process within weeks the that of to

Kerry Jackson

can that can. in and third four taken closure. performance close every of we're store margin through We've pleased gross very the quarter almost out or close months store margin We the dollar the to we we so with the peek store that the that

took XXth and exactly learnings that we're going quarter. the to we it closing believe from to third duplicate So and we we're the fourth what we have in that store the did in applied the quarter,

Operator

Poser. from will a follow-up Sam we take And

Sam Poser

closing first XX in four stores the third you Real one quarter, quick, the you stores the store in closed close. XX of stores additional for quarter are in quarter, five total stores and second the the

slightly it's XX the doubling to the double year, are store and year, closing the Is it's most comes probably not at you Next big anything, that of cost picture. saying more is not of end but which that just XX, correct? from

Clifton Sifford

correct. is That

Operator

it have time, no or at to any Cliff we additional further closing I'll back And questions remarks remarks. Sifford turn for this so

Clifton Sifford

We do on call forward hope to Thanksgiving family us everybody year. to the the look about today. appreciate you results and we joining fourth with next has We you incredible quarter their our talking

Operator

your now And today's concludes conference. participation. you for And Thank may this you disconnect.