Footwear retailer Shoe Carnival (NASDAQ:SCVL) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 6.1% year on year to $262.9 million. The company’s full-year revenue guidance of $1.19 billion at the midpoint came in 5.2% below analysts’ estimates. Its GAAP profit of $0.53 per share was 15.2% above analysts’ consensus estimates.
Revenue: $262.9 million vs analyst estimates of $270.2 million (6.1% year-on-year decline, 2.7% miss)
EPS (GAAP): $0.53 vs analyst estimates of $0.46 (15.2% beat)
Adjusted EBITDA: $17.14 million vs analyst estimates of $24.7 million (6.5% margin, 30.6% miss)
Management’s revenue guidance for the upcoming financial year 2025 is $1.19 billion at the midpoint, missing analyst estimates by 5.2% and implying -1.1% growth (vs 2.4% in FY2024)
EPS (GAAP) guidance for the upcoming financial year 2025 is $1.85 at the midpoint, missing analyst estimates by 32.7%
Operating Margin: 5.3%, down from 7.4% in the same quarter last year
Free Cash Flow Margin: 13.8%, similar to the same quarter last year
Same-Store Sales fell 6.3% year on year (-9.4% in the same quarter last year)
Market Capitalization: $615.5 million
“I would like to thank our team members and brand partners for their exceptional contributions to our growth during Fiscal 2024. We achieved the very top end of our annual profit guidance and drove solid sales growth despite a challenging economic landscape. Shoe Station expanded at a pace that made it the fastest growing retailer in our industry once again. We rapidly captured full synergies from our Rogan’s acquisition and grew our sales during key event periods throughout the year,” said Mark Worden, President and Chief Executive Officer.
Company Overview
Known for its playful atmosphere that features carnival elements, Shoe Carnival (NASDAQ:SCVL) is a retailer that sells footwear from mainstream brands for the entire family.
Footwear Retailer
Footwear sales–like their apparel counterparts–are driven by seasons, trends, and innovation more so than absolute need and similarly face the bigger-picture secular trend of e-commerce penetration. Footwear plays a part in societal belonging, personal expression, and occasion, and retailers selling shoes recognize this. Therefore, they aim to balance selection, competitive prices, and the latest trends to attract consumers. Unlike their apparel counterparts, footwear retailers most sell popular third-party brands (as opposed to their own exclusive brands), which could mean less exclusivity of product but more nimbleness to pivot to what’s hot.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.
With $1.20 billion in revenue over the past 12 months, Shoe Carnival is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers.
As you can see below, Shoe Carnival’s sales grew at a sluggish 3% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts).
Shoe Carnival Quarterly Revenue
This quarter, Shoe Carnival missed Wall Street’s estimates and reported a rather uninspiring 6.1% year-on-year revenue decline, generating $262.9 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 3.8% over the next 12 months, similar to its five-year rate. This projection is above average for the sector and implies its newer products will help maintain its historical top-line performance.
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Store Performance
Number of Stores
A retailer’s store count often determines how much revenue it can generate.
Over the last two years, Shoe Carnival opened new stores at a rapid clip by averaging 3.9% annual growth, among the fastest in the consumer retail sector. This gives it a chance to scale into a mid-sized business over time.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Note that Shoe Carnival reports its store count intermittently, so some data points are missing in the chart below.
Shoe Carnival Operating Locations
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed for at least a year.
Shoe Carnival’s demand has been shrinking over the last two years as its same-store sales have averaged 6.4% annual declines. This performance is concerning - it shows Shoe Carnival artificially boosts its revenue by building new stores. We’d like to see a company’s same-store sales rise before it takes on the costly, capital-intensive endeavor of expanding its store base.
Shoe Carnival Same-Store Sales Growth
In the latest quarter, Shoe Carnival’s same-store sales fell by 6.3% year on year. This performance was more or less in line with its historical levels.
Key Takeaways from Shoe Carnival’s Q4 Results
We enjoyed seeing Shoe Carnival beat analysts’ EPS expectations this quarter. On the other hand, its full-year revenue guidance missed significantly and its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 16% to $19.02 immediately after reporting.
The latest quarter from Shoe Carnival’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
