Shoe Carnival, Inc. (NASDAQ:SCVL) Q4 2022 Earnings Call Transcript

Kerry Jackson: Well, the €“ you are absolutely right, Jim. And in the first half of €˜22, we saw significantly higher freight costs. That will become a tailwind for us as we go into €˜23, we had €“ where the supply chains have healed. While fuel is still elevated and labor for transportation is elevated, it’s not going to go back to €˜19 levels, but we will see a benefit against that on a go-forward basis against €˜23. Now, one of the things that we wanted to kind of take into account is that as retail more normalizes, we are leaving ourselves some opportunity within our guidance that we are going to become more a lower merchandise margin, slightly lower, but that will be offset by the supply chain costs coming down also. So, that’s why we are guiding to about a 37% gross profit margin. It doesn’t mean we are changing the way we are operating. We are giving the opportunity as retail more normalizes that we may see a little more pressure on our merch margin.

Jim Chartier: Okay. And then your Shoe Station looks like it missed by like $5 million or something in fourth quarter. So, any color around what happened with Shoe Station in the fourth quarter would be great. And then does it change the outlook for the business going forward?

Mark Worden: Hey Jim, it’s Mark. The Shoe Station ended just slightly below what we expected at approximately $100 million. The customer count landed ahead of where we wanted and the integration far ahead of where we wanted. As Kerry mentioned, we had weather disruptions throughout some core seasons. And I think I mentioned in the last call, we have decided to postpone the shoestation.com launch to the beginning of this new fiscal as opposed to putting any risk into the fourth quarter of the successful launch. That launched smoothly to begin this year in February. And we are rapidly capturing new customers, new data and great success. On a go-forward basis, we are incredibly enthusiastic about Shoe Station. It’s exceeding our internal expectations, and we have got a bright future ahead.

Jim Chartier: Great. Thank you.

Operator: Our next question comes from the line of Mitch Kummetz from Seaport Research. Please proceed.

Mitch Kummetz: Yes. Thanks for taking my follow-up questions. Just starting €“ just a little bit more maybe on the shape of the year, if Q1 sales were down mid-singles and full year sales are flat to up 4.5%, can you kind of help me understand how we get to that? I mean do you expect sales to progressively €“ the sales growth to progressively get better over the course of the year, or do you think there is a big step change from sort of Q1 to Q2? Any more color kind of on the shape of the year?

Mark Worden: Hey good morning Mitch, it’s Mark. We would love to. If you recall, last year, we had some significant supply challenges and disruptions to our athletic business in our most important part of the year. And we were disappointed with our ability to delight that athletic kid customer in back-to-school. As Carl alluded to, we expect significantly improved position on the product and all of the brands our customers most want this back-to-school season. And therefore, we are expecting significant growth surrounding the back-to-school season as well as leading into it, where we also had choppy supply chain challenges from some of the world’s biggest vendors in that June-July timeframe. We are in a much better place for that.

So, we have a lot of confidence in that timeframe. Kerry can provide some more specifics. But that is the primary reason we will see a significant acceleration. And we don’t really see that tied to the macroeconomic situation. That is a real benefit curtailment for us based on challenges last year being rectified this year.