Shoe Carnival Shares Plummet on Weak Outlook

Analysts downgraded their earnings estimates for Shoe Carnival Inc. after a combination of macroeconomic pressures and increased promotional activity weighed on the company’s outlook for the full year.

Sam Poser, an analyst at Sterne Agee, lowered his full-year fiscal 2014 and 2015 earnings per share guidance to $1.29 and $1.49, respectively, from $1.41 and $1.63, following the company’s quarterly update.

“We do not know if the weakness in traffic [and] same-store sales is due to the macroeconomic pressures, which is out of management’s hands, or is due to Shoe Carnival losing out to the competition,” Poser said. “We question whether the strength in canvas shoes, running and boys’ basketball is enough to carry same-store sales going into the back-to-school selling season.”

Poser added that the company’s guidance for the second quarter missed expectations due to promotional activity and higher pre-store opening costs.

Shoe Carnival reported a 1.5 percent increase in revenue to $235.8 million for the quarter, from $232.3 million a year ago.

Net earnings for the quarter were $9.2 million, or 45 cents per diluted share, down from $9.5 million, or 47 cents, in the prior corresponding period. The result was on the lower end of the firm’s guidance for EPS of between 45 cents and 52 cents, and missed analysts’ consensus forecasts for EPS of 49 cents.

Shoe Carnival shares were down 12.8 percent, or $2.77, at $18.85 in morning trading.

On a conference call with analysts and investors, Shoe Carnival President and CEO Cliff Sifford said, “The first five weeks of the first quarter were disrupted with harsh winter storms that negatively affected traffic across the chain. However, during the second half of the quarter, more seasonal weather conditions and a later Easter allowed us to finish the quarter with a comparable-store sales decrease of 1.7 percent.”

Sifford added that while foot traffic in stores was weak for the quarter, “Our strategy of elevating our branded assortment through the addition of better department store brands led to an increase in all other metrics we measure ourselves by.”

Shoe Carnival expects to post second-quarter EPS of between 12 cents and 16 cents on revenue of $223 million to $228 million. The updated guidance missed analysts’ consensus forecasts for EPS of 27 cents on revenue of $232.9 million.

“We continue to look at comparable-store sales for the second quarter cautiously. Sales month-to-date are running down mid-single digits,” Sifford said on the call.

“It is our belief that this trend and the current uncertain economic environment will need to be more promotional as we navigate through this quarter,” he added.

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