Shoe Carnival (SCVL), a retailer of moderately priced footwear, is trading sharply lower today after reporting Q1 (Apr) results last night. Non-GAAP EPS came in at $0.78, after backing out a $0.13 tax benefit. Revenue fell 1.4% yr/yr to $253.8 mln. Both metrics were below market expectations.
In terms of full year guidance, Shoe Carnival reaffirmed revenue guidance at $1.035-1.043 bln. SCVL upped its EPS guidance to $2.73-2.83, but that appears to include the $0.13 tax benefit. As such, it looks like a reaffirm on EPS, not an increase in guidance. The treatment of this tax benefit is a little confusing. We are backing it out for our AprQ analysis and we assume it should also be backed out of the full year guidance, but SCVL is not explicitly saying it should be backed out, so there is some ambiguity here as to whether it's in the full year guidance or not. We believe it is in the full year EPS guidance and should be backed out. It's just something to be mindful of in coming quarters.
Same store comps were +0.2% in AprQ. That's down quite a bit from +4.7% comps in JanQ. It's also a good bit below SCVL's full year guidance of low single digits (this full year comp guidance was reaffirmed). As such, the fiscal year is getting off to a slow start. We are a bit surprised that SCVL did not lower full year comp guidance given the weakness in Q1 (Apr). Perhaps management thinks it's too early in the year to change guidance.
So, what happened to coms in AprQ? CEO Cliff Sifford says the company faced a tough February, which was hurt by a later tax refund season and inclement weather. However, he noted there was marked improvement in March and April, fueled by the Easter holiday. In fact, Sifford said that the combined comps for March/April came in at +3.6%. So, there was improvement later in the quarter. Hopefully, this momentum extends in JulQ.
Reporting an EPS miss is unusual for SCVL as it's the first time this has happened since 3Q16. In fact, SCVL is known for its consistent and growing earnings results that meet or exceed analyst expectations. It also has done a good job at thwarting online competitors by being different in terms of its marketing, its store layout and by having a mic-person. For example, its marketing effort specifically targets moderate income, value conscious consumers. Also, it promotes a high-energy shopping experience with loud colors and by featuring a stage and mic-person who announces deals, organizes contests, and games etc. Most retailers do not do this.
However, after a big run in the stock from around $15 in September 2017 to $45 by September 2018, the stock has been trending lower and is taking a big hit today. It's now back to the $27 area. Clearly, some of the shine has come off SCVL's story. Hopefully, the stock can get back in an uptrend later this year, but this was not a great way to start FY19.