Shoe Carnival (NASDAQ:SCVL) reported fourth-quarter and full-year fiscal 2025 results that topped consensus earnings expectations, while management outlined a more measured pace for its store “rebanner” program and guided to lower fiscal 2026 earnings amid gross margin pressure tied largely to tariffs and inventory actions.
Leadership change and strategic focus
Interim President and CEO Cliff Sifford opened the call by addressing a leadership transition: Mark Worden departed as president and CEO on Feb. 24, and the board appointed Sifford as interim CEO while a search for a permanent successor is underway. Sifford previously served as Shoe Carnival’s president and CEO from 2012 to 2021 and has remained vice chairman of the board.
Fourth-quarter results: Sales declines, margin held steady
Chief Financial Officer Kerry Jackson said fourth-quarter net sales were $254.1 million, down 3.4% from $262.9 million in the fourth quarter of fiscal 2024. Comparable store sales declined 3.5%.
By banner, Jackson said Shoe Station net sales were approximately flat with a low single-digit comparable decline, while Shoe Carnival net sales declined 4.5% with a mid-single digit comparable decline. Rogan’s Shoes, now fully integrated into Shoe Station’s operating structure, generated $15.5 million in net sales; Jackson said product margin expansion exceeded 500 basis points as the company completed the transition to the Shoe Station assortment in those stores.
Gross profit margin was 34.9%, flat year over year. Jackson attributed a 30-basis-point improvement in merchandise margin to pricing discipline, which was offset by 30 basis points of deleverage in buying, distribution and occupancy costs on lower sales volume. He described the holiday period as “highly competitive,” adding that the company made deliberate pricing adjustments to remain competitive through December.
SG&A expense was $77.8 million, or 30.6% of net sales, compared to $77.6 million, or 29.6%, a year earlier. Jackson said the increase as a percentage of sales reflected deleverage on lower revenue and approximately $2.7 million of rebanner-related investment, partially offset by lower variable selling costs.
Net income was $9.1 million, or $0.33 per diluted share, compared with $14.7 million, or $0.53 per diluted share, in the prior-year quarter. Jackson noted the prior-year quarter included $0.19 per share of tax credits and other benefits related to the Rogan’s acquisition that did not recur. He also said fiscal 2025 fourth-quarter earnings included roughly $0.08 per share of rebanner investment.
Full-year fiscal 2025: EPS beat, cash position and inventory build
For fiscal 2025, Jackson said net sales were $1.135 billion, down 5.6%, with the comparable store sales decline also 5.6%. He said Shoe Station’s mid-single digit decline at Shoe Carnival was partially offset by Shoe Station’s low single-digit growth. Shoe Station net sales were $236.7 million, representing 21% of total net sales, and grew organically 2.7% year over year. Sifford said Shoe Station’s results outperformed the family footwear industry for the third consecutive year, even as Shoe Carnival sales declined; the Shoe Carnival banner still represented roughly 65% of total volume.
Full-year gross profit margin was 36.6%, up 100 basis points from 35.6% in fiscal 2024, marking the fifth consecutive year above 35%. Jackson said merchandise margin expanded about 180 basis points, and he spent much of his prepared remarks explaining that expansion as a key driver of the tougher fiscal 2026 comparison.
Jackson said the company raised retail prices in the second quarter of fiscal 2025 in anticipation of tariff-driven cost increases, but tariff-affected product had not yet entered the cost stream. That created a period of higher selling prices against pre-tariff costs, producing what he described as a “temporary but meaningful” merchandise margin benefit that supported fiscal 2025 results. He said that benefit would not recur in fiscal 2026 as higher costs arrive while competitive dynamics constrain further pricing.
SG&A for the year was $348.4 million, or 30.7% of net sales, versus $337.6 million, or 28.0%, in fiscal 2024. Jackson said the increase reflected about 2.0 points of rebanner investment and the remainder from deleveraging on lower revenue. Operating income was $66.8 million, or 5.9% of net sales, and net income was $52.3 million, or $1.90 per diluted share, which management said exceeded consensus estimates.
Jackson said full-year rebanner P&L investment reduced operating income by approximately $24.1 million, or $0.66 per diluted share. The company ended the year with $130.7 million in cash equivalents and marketable securities, no debt outstanding (its 21st consecutive debt-free year-end), $100 million of available revolving credit and $50 million remaining under its share repurchase authorization. Operating cash flow was $71.3 million, and capital expenditures were $44.7 million, primarily rebanner-related.
Merchandise inventories ended fiscal 2025 at $439.6 million, up 14% from $385.6 million a year earlier. Both Sifford and Jackson said the increase was intentional, driven by opportunistic pre-tariff purchases of seasonal and in-demand products. Management said reducing inventory is an operational priority in fiscal 2026, but warned that doing so through targeted promotional activity would pressure near-term gross margins.
Rebanner program: Slower pace, focus on demographics and assortments
Sifford said fiscal 2025 was the first large-scale deployment of the rebanner initiative, with 101 stores converted after an initial 10-store test in fiscal 2024. After reviewing performance—particularly in the second half—management observed “meaningful variability” across converted locations.
In Q&A, Sifford said the variability reflects a mix of factors, including differences in demographics and the possibility that the company “raised the assortment level a little too high” for some legacy Shoe Carnival locations. He said the company converted stores too quickly before doing sufficient store-by-store research, and that the team is now digging into each store to adjust product assortments based on customer and demographic data. He said management believes the issue is fixable and aims to have assortment adjustments in place by back-to-school timing to support a better second half.
Sifford said the company does not plan to convert any Shoe Station stores back to Shoe Carnival. However, he indicated the company is now leaning toward operating two banners over the long term, with Shoe Station deployed in areas where demographics support its product mix and Shoe Carnival continuing in other regions. Jackson later added that the company no longer believes 90% of stores will be rebannered as Shoe Station, citing demographic fit as a key factor under review.
Fiscal 2026 outlook: Lower EPS on gross margin compression, costs targeted down
Management guided fiscal 2026 EPS of $1.40 to $1.60, excluding CEO transition costs, compared with $1.90 in fiscal 2025. Jackson said net sales are expected to range from down 1% to up 1% year over year, with comparable store sales expected to be weaker in the first half and improve in the second half.
Gross profit margin is expected to be approximately 34%, down about 260 basis points. Jackson attributed the decline to three factors:
- Tariff-driven cost increases as pre-tariff inventory sells through and is replaced with higher-cost goods
- Non-recurrence of fiscal 2025’s pricing timing benefit from raising prices before costs increased
- Promotional activity tied to inventory reduction as the company works through excess and non-core merchandise, with most promotional selling expected in the first half
On expenses, management expects SG&A to decrease about $12 million to $14 million versus fiscal 2025, reflecting a reduced pace of rebanner activity and continued cost discipline.
The company also revised its fiscal 2026 rebanner plans, expecting to convert about 21 stores in the first half ahead of back-to-school, compared with 71 stores previously communicated. Jackson said rebanner P&L investment is expected to be $10 million to $15 million, down from $25 million to $30 million, while rebanner capital expenditures are expected to be $5 million to $7 million, down from $25 million to $35 million.
Despite fewer conversions, management reiterated a goal to reduce merchandise inventory by $50 million to $65 million during fiscal 2026, which Jackson said should significantly increase operating cash flow compared with fiscal 2025, helped by lower expected capital spending.
Sifford also highlighted a Jordan brand launch from Nike that is available in over 60% of stores, with a full fleet rollout expected by mid-April. He said the brand could reach about 5% of enterprise athletic sales, though management does not expect all of that volume to be incremental due to expected assortment displacement.
Separately, Sifford said the board approved an increase in the quarterly cash dividend to $0.17 per share, payable April 20, 2026, to shareholders of record as of April 6, 2026. He said this marked the twelfth consecutive year of dividend increases and the 56th consecutive quarter of dividend payments.
Looking beyond fiscal 2026, Jackson said the company expects a return to “more historically typical” gross margins of better than 35% in fiscal 2027, describing fiscal 2026 as a transition year as the prior year’s temporary margin benefit unwinds. Management said it would provide additional updates on the longer-term rebanner trajectory as its store and demographic analysis progresses.
About Shoe Carnival (NASDAQ:SCVL)
Shoe Carnival, Inc (NASDAQ: SCVL) is a U.S.-based specialty retailer offering a broad assortment of footwear, apparel and accessories for the entire family. Through its network of brick-and-mortar stores and e-commerce platform, the company provides casual, athletic and dress shoes for men, women and children, as well as complementary apparel, handbags, socks and other accessories designed to deliver value and variety. Its distinctive in-store carnival host service model aims to create an engaging shopping experience and foster customer loyalty.
Founded in 1978 and headquartered in Evansville, Indiana, Shoe Carnival has expanded over four decades to operate more than 350 retail locations across over 30 states.
