Shoe Carnival (SCVL 39.47, +1.31, +3.45%) has made a nice move over the past few
weeks. This footwear retailer has been holding up quite well even as a number
of retailers have been struggling.
Yesterday, SCVL updated its sales and earnings guidance for FY18 and introduced an outlook for FY19. The company now expects FY18 sales to be approximately $1.028 bln, up from prior guidance of $1.020-1.022 bln. Same store comp guidance was increased to approximately +4% from prior guidance of +3.5%. EPS guidance was upped to $2.41-2.43 from $2.36-2.38. Looking ahead to FY19, Shoe Carnival expects sales in the range of $1.035-1.043 bln with a low single-digit comp mark. EPS is expected to be in the range of $2.60-2.70.
So, how does this shoe retailer achieve success in the age of the internet? For one thing, its marketing effort targets moderate income, value-conscious consumers seeking name brand footwear. One way in which Shoe Carnival differentiates its retail concept from those of its competitors is by combining competitive pricing with a fun shopping experience.
It promotes a high-energy retail environment by decorating with exciting graphics and bold colors and by featuring a stage and mic-person as the focal point in its stores, which is pretty unique. This mic-person announces current specials, organizes contests and games, and assists customers with finding merchandise. The mic-person offers limited-duration promotions throughout the day, encouraging customers to take immediate advantage of value pricing offers. The character of the shopping experience provided at its stores helps Shoe Carnival to build a loyal, repeat customer base and to generate positive word-of-mouth advertising.
Additionally, SCVL achieves low labor costs by housing merchandise directly on the selling floor in an open stock format, allowing customers to serve themselves. Also contributing to expense-consciousness, its stores are predominantly located in open-air shopping centers in order to take advantage of lower occupancy costs.
All of this has helped to build consistent results from SCVL. In particular, SCVL has done well with its high-margin seasonal categories. SCVL posted back-to-back big EPS upside quarters in Q2 (Jul) and Q3 (Oct), and it seems like Q4 (Jan) is going to present a good result as well. On a valuation basis, SCVL is trading at a very reasonable forward P/E of 14.7x based on the mid-point of the guidance. Looking ahead, SCVL will report full Q4 (Jan) results on March 28.
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