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Shoe Carnival (SCVL +7%) jumps higher today after registering solid numbers in Q2 (Jul), including decent-sized beats on its top and bottom lines. While the shoe retailer's comp growth remained negative, sliding by -2.1%, it substantially improved over the -9.4% decline last quarter, reflecting upward momentum and a healthy back-to-school season.

• Like recent quarterly numbers from counterpart Boot Barn Holdings (BOOT), SCVL registered upbeat headline results in Q2, delivering adjusted EPS of $0.83 on revenue growth of 12.9% yr/yr to $332.7 mln, nearly double the growth rate posted in Q1 (Apr). While comparable store sales growth was negative in Q2, comps turned positive during the back-to-school season, which begins around the end of July and lasts until around the Labor Day weekend.
• SCVL chalked up a shift in its marketing campaign to its buoyant comp growth during the back-to-school season. Management noted that this year marked the first season where it fully pivoted from a traditional marketing campaign that relied on TV to a digital-first approach it had tested throughout the past year. By shifting to digital channels, SCVL commanded greater flexibility, allowing it to amp up messaging in real-time without spending additional marketing dollars.
• The tailwind produced by a healthy back-to-school season is seeping into Q3 (Oct). During August, SCVL achieved low-single-digit comp growth, fueled by a mid-to-high-single-digit jump in children's and athletics categories. Comps were positive across SCVL's Carnival and Station banners. As a result, SCVL hiked the low end of its FY25 (Jan) forecasts. The company now targets adjusted EPS of $2.60-2.75 from $2.55-2.75, revenue of $1.23-1.25 bln from $1.21-1.25, and comps of down 1.5% to up 1%, compared to down 3% to up 1%.
• CEO Mark Worden cautioned that the likely scenario would be achieving the lower side of its updated FY25 estimates. However, if the company continued setting records during the upcoming holiday shopping season, then it noted that the high end of its guidance ranges would be possible.

SCVL's Q2 performance may have placed the company back on the right foot after dampened discretionary spending curbed past quarterly numbers. However, even though raising its worst-case outcome for the year was encouraging, Mr. Worden's comments reflect cautious optimism, similar to the tone expressed by BOOT last month. Inflationary headwinds can generate volatility month-to-month, keeping near-term uncertainty elevated. Therefore, given current price levels, we urge caution over the near term, especially since the stock can experience considerable swings given its relatively high short interest of over 10%.