What changed in this filing

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Item 1. Business

2022-03-25 compared with 2021-03-26 · 568 added, 227 removed, 204 unchanged (80% of the section changed)

Shoe Carnival, Inc.

is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our store locations, our mobile app or online.

We offer customers a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with an emphasis on national name brands.

We differentiate our retail concept from our competitors by our distinctive, fun and promotional marketing efforts.

On average, our physical stores are approximately 10,800 square feet and carry inventory of approximately 25,200 pairs of shoes per location.

Including e-commerce sales in close proximity to a physical store, our physical stores each generated an average of $2.5 million in annual sales in fiscal 2020.

As of January 30, 2021, we operated 383 stores in 35 states and Puerto Rico and offered online shopping at www.shoecarnival.com.

is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our store locations, our mobile apps or online.

We offer customers a broad assortment of dress, casual and athletic footwear for the entire family with an emphasis on national name brands.

We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996.

References to “Shoe Carnival,” “we,” “us,” “our” and the “Company” in this Annual Report on Form 10-K refer to Shoe Carnival, Inc.

References to “Shoe Carnival”

and “Shoe Station”

are to the individual banners, not the entire company.

References to “we,”

“us,”

“our”

and the “Company”

in this Annual Report on Form 10-K refer to Shoe Carnival, Inc.

and its subsidiaries.

During fiscal 2021, we grew our net sales by 36% compared to fiscal 2020 and 28% compared to fiscal 2019.

The diluted net income per share earned in fiscal 2021 of $5.42 exceeded the diluted net income per share earned during the last six years combined.

See PART II, ITEM 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K for more information regarding the trends impacting our fiscal 2021 operating results.

Shoe Carnival

Our Shoe Carnival retail concept is differentiated from competitors by our distinctive, fun and promotional marketing efforts.

Shoe Carnival stores combine competitive pricing with a high-energy in-store environment that encourages customer participation.

Unique features of our store experience include upbeat music, opportunities for customers to spin our iconic spin-n-win wheel, and a mic-person who runs in-store specials.

These specials include contests and games and hot deals of the moment to encourage customers to take immediate advantage of our special, in-store pricing.

On average, our Shoe Carnival physical stores are approximately 10,900 square feet and carry inventory of approximately 25,700 pairs of shoes per location.

Including e-commerce sales in close proximity to a physical store, our physical stores each generated an average of $3.5 million in annual sales in fiscal 2021 and over $300 per square foot.

As of January 29, 2022, we operated 372 stores in 35 states and Puerto Rico under the Shoe Carnival banner and offered online shopping at www.shoecarnival.com.

On December 3, 2021, we acquired substantially all of the assets of privately-held, family-owned Shoe Station, Inc.

("Shoe Station").

The Shoe Station assets were acquired for approximately $70.7 million, inclusive of customary adjustments which are not yet finalized, and funded with cash on hand.

This acquisition was the first acquisition in our history.

As of January 29, 2022, we operated 21 locations across the Southeast under the Shoe Station banner.

The addition of this banner and retail locations creates a complementary retail platform to serve a broader family footwear customer base across both urban and suburban demographics and provides an additional near-term growth opportunity for us.

On average, our Shoe Station physical stores are approximately 16,700 square feet and carry an average inventory of 43,300 pairs of shoes per location.

D ue to the size of the stores and a targeted more affluent family footwear customer, these locations provide for a primary destination shopping experience.

We will also offer online shopping under this banner at www.shoestation.com.

Revenues attributed to the Shoe Station banner generated from the acquisition date through January 29, 2022 totaled $16.6 million.

More information on the acquisition can be found in Note 3 - "Acquisition of Shoe Station" in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Key Competitive Strengths

We believe our financial success is due to a number of key competitive strengths that make Shoe Carnival a destination of choice for today’s retail consumer.

We believe our financial success is due to a number of key competitive strengths that make our banners, Shoe Carnival and Shoe Station, destinations of choice for today’s retail consumer.

Distinctive shopping experience

Our stores combine competitive pricing with a promotional, high-energy in-store environment that encourages customer participation and injects fun and excitement into every shopping experience.

Unique features of our store experience include upbeat music, opportunities for our customer to spin our iconic spin-n-win wheel, and a mic-person who runs specials for customers shopping at our stores.

These specials include contests and games and hot deals of the moment to encourage customers to take immediate advantage of our promotional pricing.

Our staff is dedicated to customer service and assists and educates customers with the features and location of merchandise, as well as finding sizes, styles and colors.

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and enhanced sell-through of in-season goods.

A similar customer experience is reflected in our e-commerce platform through special promotions and limited time sales.

Similar customer experiences are reflected in our e-commerce platform through special promotions and limited time sales.

Broad merchandise assortment

Our objective is to be the destination retailer-of-choice for value-priced, on-trend branded and private label footwear.

Our product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family.

Our average store carries shoes in four general categories – women’s, men’s, children’s and athletics, as well as a broad range of accessories such as socks, belts, shoe care items, handbags, hats, sport bags, backpacks, water bottles and wallets.

Footwear is organized by category and brand, creating strong brand statements within the aisles.

These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store.

Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle statements by grouping similar footwear from multiple vendors.

Over 100 of our physical stores have strongly branded Nike shops that highlight Nike products within the stores, and we expect to add more Nike shops to our physical stores through 2023.

Our product assortment is comprised of on-trend branded and private label footwear for the entire family and includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes.

Our physical stores carry shoes in two general categories –

athletics and non-athletics with subcategories for men's, women's and children's shoes, as well as a broad range of accessories.

Our e-commerce platform offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and colors that may not be available in all stores.

Value pricing for our customers

Our customer is primarily a moderate income, value-conscious consumer seeking name brand footwear across all ages.

Although the core merchandise assortment tends to be similar for each store, there are differences between our store banners, and to some extent, there is further differentiation by store under each banner, reflecting each store’s unique demographics and customer interests.

Our knowledge of these interests, combined with our vendor relationships and distribution process, allows us to react quickly to emerging trends or special events.

Approximately 160 of our Shoe Carnival stores have athletic shops that highlight leading athletic brands.

We expect to continue growing our "athletic shop" in-store concept across our fleet in the years ahead.

Competitive pricing for our customers

Our customer is primarily a moderate income, value-conscious consumer seeking name brand footwear across all ages, with our Shoe Station banner targeting a higher price point and more suburban customer.

We believe that by offering a wide selection of popular styles of name brand and private label merchandise at competitive prices, we generate broad customer appeal.

Additionally, the time-conscious customer appreciates the convenience of one-stop shopping for the entire family, whether this occurs at any of our store locations, online at

shoecarnival.com or through our mobile app.

Our fun and promotional shopping environment adds to our value - priced reputation.

Additionally, the time-conscious customer appreciates the convenience of one-stop shopping for the entire family, whether this occurs at any of our store locations or through our other omnichannel choices.

Efficient store level cost structure

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This reduces the staffing required to assist customers and reduces store level labor costs as a percentage of sales.

We locate stores predominantly in open-air shopping centers in order to take advantage of lower occupancy costs and maximize our exposure to value-conscious shoppers.

We continue to invest in our existing store locations and expect to remodel and refresh many of our physical stores over the next three fiscal years.

Heavy reliance on information technology

We locate our Shoe Carnival stores predominantly in open-air shopping centers in order to take advantage of lower occupancy costs and maximize our exposure to value-conscious shoppers.

Our Shoe Station stores are primary destinations and thus many are standalone structures within high traffic shopping districts.

We continue to invest in our existing store locations and expect to have our store modernization program complete by the end of fiscal 2024.

By the end of fiscal 2022, we plan to be nearly half complete with our modernization plans.

Heavy reliance on information technology growth strategy

We have invested significant resources in information technology.

Our proprietary inventory management and advanced point-of-sale (“POS”) systems provide corporate management, buyers and store managers with the timely information necessary to monitor and control all phases of operations.

The POS provides, in addition to other features, full price management (including price look-up), promotion tracking capabilities (in support of the spontaneous nature of the in-store price promotions), real-time sales and cost of sales by product category at the store level and customer tracking.

Using the POS, store managers are able to monitor sales and cost of sales on a real-time basis throughout the day.

Reacting to sales trends, our mic-people use the POS to choose from among a number of product promotions supplied by our centralized merchandising staff.

Our proprietary inventory management and advanced point-of-sale (“POS”) syste ms provide corporate management, buyers and store managers with the timely information necessary to monitor and control all phases of operations.

The POS provides, in addition to other features, full price management (including price look-up), promotion trackin g capabilities (in support of the spontaneous nature of the in-store price promotions), real-time sales and cost of sales by product category at the store level and customer tracking.

Using the POS, store personnel and centralized merchandising staff are able to monitor sales, cost of sales, and the success of product promotions in real-time.

Our centralized network connects our corporate office to our distribution center and retail stores via a wide area network, providing up-to-date sales and inventory information as required.

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Using this information, our merchandise managers meet regularly with vendors to compare their product sales and margins and return on inventory investment against previously stated objectives.

We believe timely access to key business data has enabled us to drive our comparable store sales, manage our markdown activity and improve inventory turnover.

In fiscal 2020, we implemented new Traffic, Warehouse and Order Management Systems (“TMS”, “WMS”, “OMS”, respectively).

We believe these cloud-based, software-as-a-service arrangements will enable us to meet the complex demands of multi-channel fulfillment, enhance our supply chain, position us for long-term growth and ultimately enhance customer satisfaction and convenience in an increasingly competitive environment.

We believe timely

access to key business data has enabled us to drive our comparable store sales, manage our markdown activity and improve inventory turnover.

In fiscal 2020, we implemented new Transportation, Warehouse and Order Management Systems (“TMS”, “WMS”, “OMS”, respectively).

These cloud-based, software-as-a-service arrangements have enabled us to meet the complex demands of omnichannel fulfillment, enhanced our supply chain, positioned us for long-term growth and ultimately enhanced customer satisfaction and convenience in an increasingly competitive and changing environment, and we believe further benefits will be achieved.

Disciplined Approach to Capital Management

We remain focused on funding our operations without leverage.

We ended fiscal 2020 with no debt and $106.5 million of cash and cash equivalents.

Over the last five years, we have had no debt outstanding and a cash and cash equivalents balance of at least $48 million at the end of each fiscal year.

We remain focused on funding our operations and any future acquisitions similar to the Shoe Station acquisition without leverage.

We ended fiscal 2021 with no debt and $132.4 million of cash and cash equivalents and marketable securities, even after funding the purchase of Shoe Station with cash on hand during our fiscal fourth quarter.

Over the last five fiscal years, we have had no debt outstanding and cash and cash equivalents of at least $48 million at the end of each fiscal year.

We believe this approach increases our ability to make impactful long-term decisions and enhances our stakeholder relationships.

Over the last five fiscal years we have returned approximately $181.6 million to our shareholders through share repurchases and dividends.

Growth Strategy

Store portfolio

Increasing market penetration by opening new stores has historically been a key component of our growth strategy, and we continue to focus on generating positive long-term financial performance for our store portfolio.

We opened four new stores in fiscal 2020 and expect to open a limited number of new stores in existing markets in fiscal 2021.

We believe our current store footprint provides for growth nationwide as well as fill-in opportunities within existing markets.

We expect to pursue opportunities for store growth across large and mid-size markets as we leverage customer data from our customer relationship management (“CRM”) program and more attractive real estate options become available.

Furthermore, our future store growth may continue to be impacted by the economic uncertainty

associated with the COVID-19 pandemic.

Our CRM program is more fully described below under “Multi-Channel Strategy – Customer Relationship Management.”

Our ability to cluster stores has been critical to the success of opening new stores in larger markets or geographic areas.

In large markets (populations greater than 400,000), clustering involves opening two or more stores at approximately the same time.

In smaller markets that can only support a single store, clustering involves seeking locations in reasonably close proximity to other existing markets.

This strategy creates cost efficiencies by enabling us to leverage store expenses with respect to advertising, distribution and management costs.

We believe the advantages of clustering stores in existing markets will lead to cost efficiencies and overall incremental sales gains that should more than offset any adverse effect on sales of existing stores.

We continuously analyze our portfolio of stores, with a concentration on underperforming stores, to meet our long-term goal of increasing shareholder value through increasing operating income.

Our objective is to identify and address underperforming stores that produce low or negative contribution and either renegotiate lease terms, relocate or close those stores.

Based on this analysis, we closed 13 stores in fiscal 2020 and expect to close nine stores in fiscal 2021.

Even though store closings could reduce our overall net sales volume, we believe this strategy will realize long-term improvement in operating income and diluted net income per share.

As of January 30, 2021, we operated 383 stores located across 35 states and Puerto Rico.

Our stores averaged approximately 10,800 square feet, ranging in size from 4,000 to 26,000 square feet.

Increasing market penetration by adding new stores is expected to reemerge as a key component of our growth strategy.

Through a combination of both organic and acquired store growth, we aim to add more than 10 new stores in fiscal 2022, over 20 new stores in fiscal 2023, and over 25 new stores annually by fiscal 2024, across both banners.

We believe our current store footprint provides for growth to new markets within the United States as well as fill-in opportunities within existing markets.

In the near term, we expect to pursue fill-in opportunities for store growth across large and mid-size markets as we continue to leverage customer data from our customer relationship management (“CRM”) program.

Our CRM program is more fully described below under “Omnichannel Strategy –

Customer Relationship Management.”

We believe more attractive real estate options will be available with the addition of the Shoe Station retail concept to our portfolio.

However, our future store growth may continue to be impacted by the COVID-19 pandemic and other macroeconomic uncertainty.

We opened one new Shoe Carnival branded store in fiscal 2021.

Over the last several years, we performed a store improvement plan.

As part of the plan, which is now complete, we identified underperforming stores and worked to address these stores' performance through renegotiation of lease terms, relocation, or closure.

We closed 31 stores over the last three years, 12 of which were closed in fiscal 2021.

While we continue to actively monitor the store portfolio, we do not expect any further significant closures over the next several years.

As of January 29, 2022, we leased our 393 stores located across 35 states and Puerto Rico.

New store sizes typically depend upon location and population base, and our stores are predominantly located in open-air shopping centers.

Our traditional store prototype typically utilizes between 8,000 and 12,000 square feet of leased area.

We also utilize scalable store prototypes that reflect the diverse population densities of our markets.

These prototypes utilize a wide range of leased space based on sales potential and opportunistic space availability.

The sales area is approximately 85% of the typical gross store footprint.

Our traditional Shoe Carnival store prototype typically utilizes between 8,000 and 12,000 square feet of leased space and our Shoe Station store prototype utilizes between 12,000 to 20,000 square feet of leased space.

The sales area comprises substantially all (greater than 80 percent) of our typical gross store footprint.

Historical Store Count

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New store openings

Stores acquired

Store closings

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Stores relocated

Percentage of store base remodeled

The following table identifies the number of our stores in each state and Puerto Rico as of January 29, 2022:

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West Virginia

We lease all store locations, as we believe the flexibility afforded by leasing allows us to avoid the inherent risks of owning real estate, particularly with respect to underperforming stores.

Before entering a new market, we perform a market, demographic and competition analysis to evaluate the suitability of the potential market.

Potential store site selection criteria include, among other factors, market demographics, traffic counts, tenant mix, visibility within the center and from major thoroughfares, overall retail activity of the area and proposed lease terms.

The time required to open a store after signing a lease depends primarily upon the property owner’s ability to deliver the premises.

After we accept the premises from the property owner, we can generally open a turnkey store within 60 days and open an “as-is” store in up to 115 days.

A turnkey store is generally available for immediate use from the landlord, as the landlord performs nearly all aspects of construction and delivers the store in a condition ready for fixtures.

There are typically minimal tenant improvement allowances negotiated with landlords for turnkey stores.

An “as-is” store typically requires more significant capital investment by us, as the landlord performs minimal construction and delivers the space “as-is” while representing that the location is free of hazardous materials.

There are typically significant tenant improvement allowances negotiated with landlords for “as-is” stores.

To do our part in helping to prevent the rapid spread of COVID-19 and to align with the evolving guidance from federal, state and local governments and health officials , we temporarily closed all of our stores across the United States and Puerto Rico effective March 19, 2020.

We began reopening stores in accordance with applicable public health guidelines in late April 2020.

By the beginning of our second fiscal quarter, approximately 50% of our stores were reopened, and by early June, substantially all of our stores had reopened.

Our e-commerce platform has been fully operational during the pandemic, with e-commerce orders generally fulfilled by our store locations.

As of January 30, 2021, we do not have any stores closed due to the COVID-19 pandemic.

However, we continue to closely monitor the impact of the COVID-19 pandemic on all facets of our business and will take the necessary steps to ensure the health and safety of our associates and customers.

This could include future, temporary store closures or modifications to our normal store operating processes.

Multi-Channel Strategy

Our goal is to be a world class multi-channel retailer.

The foundation of our multi-channel strategy is connecting customers with our wide assortment of store inventory through multiple channels, while maintaining a personalized, seamless customer service experience.

Our customer’s shopping journey bridges multiple devices and touchpoints.

We are committed to providing an incomparable customer experience across all channels and believe that our ongoing multi-channel initiatives represent the cornerstone for our long-term growth and are aligned with rapidly

changing consumer behavior.

These initiatives are an integral part of expanding our multi-channel footprint and creating opportunities to connect with our customers in new ways.

Omnichannel Strategy

Our goal is to be a world class multi-billion dollar omnichannel retailer.

The foundation of our omnichannel strategy is providing customers easy access to our wide assortment of merchandise via their choice of device and delivery channel.

We are committed to providing a personalized, seamless customer experience across all channels, and we believe that our ongoing omnichannel initiatives are aligned with rapidly changing consumer behavior.

Customer Relationship Management

Our CRM program continues to provide valuable customer insights to our business, resulting in more efficient and effective marketing outreach.

CRM provides our marketing, merchandising, analytics and real estate teams with a holistic view of our customer’s shopping behaviors and forms the foundation of our digital marketing efforts and our Shoe Perks loyalty program (“Shoe Perks”).

CRM provides our marketing, merchandising, analytics and real estate teams a better and more complete view of our customer’s shopping behaviors and forms the foundation of our digital marketing efforts and our Shoe Perks loyalty program (“Shoe Perks”).

Our view into customer data allows us to more effectively communicate with our customers on a segmented basis through all owned and paid media channels and tailor the merchandise mix down to a store level.

Through transaction data, we gain useful insights into our customers’ shopping habits, including where, when and how they shop our stores and navigate our online presence.

Through transaction data, we gain useful insights into our customers’

shopping habits, including where, when and how they shop our stores and navigate our online presence.

Additionally, our CRM program allows us to gain a deeper understanding of the brands and categories that our high-value customers consistently purchase so that we can continue to deliver strong performance at a geographic and store level.

Our CRM program allows us to drive customer retention by delivering each customer more individualized shopping opportunities and experiences and aids in gaining a better understanding of our existing customer base as well as identifying new customers.

We expect segmentation and activation of our high-value customers through data analysis and targeting the broader market of ‘look-a-like’ customers to play a key role in our growth.

Customers who enroll in Shoe Perks or register on our website receive personalized e-mail communications from us.

We expect segmentation and activation of our high-value customers through data analysis and targeting the broader market of ‘look-a-like’

customers to continue to play a key role in our growth.

Once a customer enrolls in Shoe Perks and provides a means for digital communication, the customer will begin receiving personalized communications from us.

These communications afford us additional opportunities to highlight our broad product assortment and promotions.

Shoe Perks provides customers with a heightened shopping experience, which includes exclusive offers and rewards that are earned by making purchases either in-store or online and through participating in other point earning opportunities that facilitate engagement with our brand.

We remain highly focused on expanding our Shoe Perks enrollment.

In fiscal 2020, we added 2.3 million new members, which brought total Shoe Perks membership to 26.3 million members at the end of fiscal 2020, an approximate 10% increase over fiscal 2019.

Shoe Perks provides customers with a heightened shopping

experience, which includes exclusive offers and rewards that are earned by making purchases either in-store or online and through participating in other point earning opportunities that facilitate engagement with our brand.

We remain focused on expanding our Shoe Perks enrollment.

In fiscal 2021, our Shoe Perks membership grew to 28.5 million members.

Purchases from Shoe Perks members were approximately 68% of our comparable net sales.

We believe our Shoe Perks program affords us tremendous opportunity to communicate, build relationships, and engage with our most loyal shoppers and increase our customer touch points, which we believe will result in long-term sales gains.

Our most loyal customers, those who qualify for our “Gold” tier, receive additional rewards and incentives.

The Gold tier represents approximately 10% of our members, and the average transaction value for these customers was approximately 40% higher than non-Gold tier Shoe Perks members in fiscal 2020.

Our most loyal customers, those who qualify for our “Gold”

tier, receive additional rewards and incentives.

The average transaction value for our Gold tier customers was approximately 47% higher than non-Gold tier Shoe Perks members in fiscal 2021.

E-commerce Platform

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In fiscal 2020, our customers embraced our e-commerce platform as demand for online shopping surged, and we exceeded our e-commerce sales expectations.

During fiscal 2020, we also added a new online payment platform, which we believe helped to generate a record increase in multi-channel sales.

This payment solution allows customers to enjoy flexible payment options for their purchases, such as separating purchases into multiple, interest free payments.

E-commerce sales represented approximately 19% of our merchandise sales in fiscal 2020 and 6% of our merchandise sales in fiscal 2019.

In fiscal 2021, e-commerce sales moderated as restrictions were lifted and consumer confidence related to in-person shopping returned.

We continue to expect our e-commerce platform to be a significant sales channel for us.

E-commerce sales represented approximately 12% of our merchandise sales in fiscal 2021, 19% in fiscal 2020 and 6% in fiscal 2019.

Ship-From-Store

Our Ship-From-Store program is a core element of our multi-channel strategy.

Our Ship-From-Store program is a core element of our omnichannel strategy.

This program allows stores to fulfill online orders and has been implemented on a chain-wide basis (with limited exceptions).

By fulfilling e-commerce orders from our store level inventory, we are able to minimize out-of-stocks, offer our customers an expanded online assortment and leverage store level inventory and overhead.

By fulfilling e-commerce orders principally from our store level inventory, we are able to minimize out-of-stocks, offer our customers an expanded online assortment and leverage store level inventory and overhead.

E-commerce orders are also fulfilled from our distribution center in Evansville, Indiana.

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This program offers our customers an expanded online assortment of styles and colors that we do not carry in-store.

While our customers benefit from expanded item assortment, the functionality of this program is seamless, and our customers’ online experience is not impacted by the vendor drop-ship fulfillment option.

While our customers benefit from expanded item assortment, the functionality of this program is seamless, and our customers’

online experience is not impacted by the vendor drop-ship fulfillment option.

We benefit from this program by not having to make a capital investment in the expanded inventory assortment, which is carried and fulfilled by our business partners participating in this program.

Buy Online, Pick Up In Store

Another key element of our multi-channel strategy is our “buy online, pick up in store” program.

Not only can our customers choose to pick up their e-commerce orders in-store, but they can now shop their favorite or nearby stores online and only see the product that is available in any given store.

This program provides the convenience of local pickup for our customers with the added benefit of driving traffic back to our stores.

Our Shoes 2U program enables us to ship product from any store to a customer’s home or store of their choice if they are unable to find the size, color or style of a shoe in the store in which they are shopping.

Other Omnichannel

Other elements of our omnichannel strategy are our “buy online, pick up in store”

program and our Shoes 2U program.

Not only can our customers choose to pick up e-commerce orders in-store, but they can shop their favorite or nearby stores online and only see the product that is available in any given store.

This program provides the convenience of local pickup for our customers or same day delivery through one of our business partners for online purchases made from a store in close proximity to the customer’s chosen delivery point.

Our Shoes 2U program enables us to ship product from any store to a customer’s home or store of choice if the customer is unable to find the size, color or style of a shoe in the store being shopped.

This creates an endless aisle experience for our customers in which our chain-wide inventory is accessible to any store customer.

Order Management System

In fiscal 2020 we launched a cloud-based OMS, which will enhance the operational efficiency of our direct-to-consumer programs.

Combined with our new WMS, our new OMS allows us to optimize the allocation of e-commerce and Shoes 2U orders and further leverage our distribution center.

Moreover, with our new OMS, we have seamless orchestration of orders across the Company as well as enhanced visibility of available inventory and insight into customer transactions.

Critical to our success is maintaining fresh, fashionable merchandise at moderate prices.

Our stores and e-commerce platform offer a broad assortment of current-season, name brand footwear, supplemented with private label merchandise and accessories.

Critical to our success is maintaining fresh, fashionable merchandise at the price points expected by our customers.

Our buyers stay in touch with evolving fashion trends and adjust growth strategies based on these trends.

This is accomplished by subscribing to an industry leading trend service, shopping fashion-leading markets, attending national trade shows, gathering vendor input and monitoring the current styles shown in leading fashion and lifestyle magazines.

This is accomplished by subscribing to an industry leading trend service, shopping

fashion-leading markets, attending national trade shows, gathering vendor input and monitoring the current styles shown in leading fashion and lifestyle magazines.

Our buyers and planners have years of experience and in-depth knowledge of our customers and the markets in which we operate.

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The mix of merchandise and the brands offered in a particular store reflect the demographics of each market, climate and seasonality, among other factors.

Management encourages store operations personnel to provide input to our merchandising staff regarding market specific fashion trends.

Our e-commerce platform offers customers an opportunity to choose from a large selection of products in all of the same categories of footwear and introduces our concept to consumers who are new to Shoe Carnival, in both existing and new markets.

In fiscal 2020, we commenced implementation of a new merchandise planning system that will provide a unified strategic planning and budgeting process that is supported by various solutions, including strategic and assortment planning, store allocation and replenishment and in-season management.

In fiscal 2020, we commenced implementation of a new merchandise planning system that provides a unified strategic planning and budgeting process that is supported by various solutions, including strategic and assortment planning, store allocation and replenishment and in-season management.

This cloud-based platform is a multi-year project.

We believe this collaborative platform will unify our buy plans, optimize inventory levels, help achieve more sales at higher margins and allow us to set goals for multiple channels and formats common in today’s competitive environment.

Our stores and e-commerce platform offer a broad assortment of current-season, name brand footwear, supplemented with private label merchandise and accessories.

We purchase merchandise from 177 footwear vendors.

Management of the purchasing function is the responsibility of our Executive Vice President – Chief Merchandising Officer.

Our buyers maintain ongoing communication with our vendors and provide feedback to our vendors on sales, profitability and current demand for their products.

Management of the purchasing function is the responsibility of our Senior Executive Vice President –

Chief Merchandising Officer.

Our buyers maintain ongoing communication with our vendors and provide feedback to our vendors on sales, profitability and demand.

We adjust future purchasing decisions based upon the results of this analysis.

In fiscal 2020, two branded suppliers, Nike, Inc.

and Skechers USA, Inc.,

collectivel y accounted for approximately 43 % of our net sales.

accounted for approximately 33 % and Skechers USA, Inc.

accounted for approximately 10 % of our net sales , respectively .

Two branded suppliers, Nike, Inc.

and Skechers USA, Inc., collectively accounted for approximately 39% of our net sales in fiscal 2021 and approximately 43% in fiscal 2020 (Nike, Inc.

approximately 28% in fiscal 2021 and 33% in fiscal 2020 and Skechers USA, Inc.

approximately 11% in fiscal 2021 and 10% in fiscal 2020).

Name brand suppliers also provide us with cooperative advertising and visual merchandising funds.

As is common in the industry, we do not have any long ‑term contracts with our suppliers.

Initial pricing levels are typically established in accordance with the manufacturer’s suggested retail pricing structure.

As is common in the industry, we do not have any long‑term contracts with our suppliers.

Initial pricing is typically established in accordance with the manufacturer’s suggested retail pricing structure.

Subsequent to this initial pricing, our buying staff manages our markdown cadence based on product-specific sell-through rates to achieve liquidation of inventory within the natural lifecycle of the product.

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These promotions include both advertised limited time sale offerings in addition to in-store and online timed specials.

The table below sets forth our percentage of merchandise sales by product category.

The table below sets forth our percentage of sales by product category.

Non-Athletics:

Women’s, men’s and children’s non-athletic footwear categories are further divided into dress, casual, sport, sandals and boots.

We classify athletic shoes by functionality, such as running, basketball or fitness shoes.

Building Brand Awareness

Our goal is to communicate a consistent brand image across all aspects of our operations and throughout our marketing mix of paid, owned and earned channels.

We highlight brands, as well as specific styles of product, using lifestyle and product imagery to showcase the product.

The use of digital media continues to grow in importance in our marketing mix, particularly as we leverage data that comes directly from our customers as part of our CRM solution, allowing us to directly communicate with our core customers.

In fiscal 2020, we invested more heavily in targeted digital advertising to drive customers to our e-commerce platform.

We believe this was an effective way to counter the pandemic and the related shifts in back-to-school shopping.

Approximately 70% of our total advertising budget in fiscal 2020 was directed to digital media.

Our goal is to communicate a consistent brand image for both of our banners across all aspects of our operations and throughout our marketing strategies.

We highlight our banners and the merchandise brands we carry, including specific styles of product, using lifestyle and product imagery to showcase merchandise brands.

The use of digital media continues to grow in importance in our marketing mix, particularly as we leverage data that comes directly

from our customers as part of our CRM solution, allowing us to directly communicate with our core customers.

In fiscal 2021, our advertising spend was directed primarily to digital media.

Television, radio, print media (including inserts, direct mail and newspaper advertising) and outdoor advertising accounted for the balance of our total advertising budget.

We strive to make each store opening a major retail event.

Major promotions during grand openings and peak selling periods feature contests and prize giveaways.

We believe our grand openings help establish a high-energy, promotional atmosphere that develops a loyal, repeat customer base and generates word of mouth advertising.

We operate a single 410,000 square foot distribution center located in Evansville, Indiana.

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We lease the facility from a third party, which expires in 2034.

Our distribution center is equipped with state-of-the-art processing and product movement equipment.

Our distribution center is equipped with mechanized processing and product movement equipment.

The facility utilizes cross docking/store replenishment and redistribution methods to fill store product requirements.

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For stores within the continental United States, a dedicated carrier, with occasional use of common carriers, handles the majority of shipments.

Our shipments to Puerto Rico are loaded for containerized overseas shipment, with final delivery by a third-party provider.

During fiscal 2020 we implemented a new WMS in order to optimize our supply chain and drive warehouse efficiency.

This new platform was integrated with our existing systems and affords us the flexibility to keep pace with changing customer buying habits.

The retail footwear business is highly competitive.

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Many of our competitors are significantly larger and have substantially greater resources than we do.

However, we believe that our distinctive retail format, in combination with our wide merchandise selection, competitive prices and low operating costs, enables us to compete effectively.

However, we believe that our distinctive retail formats, in combination with our wide merchandise selection, competitive prices, low operating costs, and strong balance sheet with no debt enable us to compete effectively.

Store Operations

Management of store operations is the responsibility of our Executive Vice President - Chief Retail Operations Officer, who is assisted by divisional vice presidents, district managers and individual store general managers.

Generally, each store has a general manager and up to three store managers, depending on sales volume.

Management of store operations is the responsibility of our Executive Vice President - Chief Retail Operations Officer.

Generally, each store has a general manager and additional store managers depending on sales volume and is overseen and supported by a district manager.

Store operations personnel make certain merchandising decisions necessary to maximize sales and profits primarily through merchandise placement, signage and timely clearance of slower selling items.

We are increasingly deploying digital display devices throughout our stores allowing signage to be controlled centrally.

Administrative functions are centralized at our corporate headquarters.

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Our commitment to, and investment in, a strong performance culture is paramount to our long-term sustainability and success.

Forbes Magazine recently recognized the quality of our employee-centric culture by naming us one of America’s Best Midsize Employers for 2019.

Our employee-centric culture aided us during the COVID-19 pandemic.

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We are firmly committed to providing equal opportunities in all aspects of employment and believe that all individuals should be treated with respect and dignity.

Diversity is an important element in our

ongoing annual mandatory training for all employees and managers.

Diversity is an important element in our ongoing annual mandatory training for all employees and managers.

We do not tolerate harassment or unlawful discrimination of any kind.

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We understand the value of diversity at all levels, whether of gender, race, ethnicity, background or experience.

As of January 30, 2021, our overall workforce identified as 66% female and 34% male.

Our broad-based leadership team, including those who manage and lead our stores and those who lead our company, identified as 59% female and 41% male as of our fiscal 2020 year end.

With respect to ethnicity, our broad-based leadership team identified as 61% Caucasian and 39% non-Caucasian as of January 30, 2021.

The diversity of our broad-based leadership team trends with the diversity of our customer base, which based on recent data from our Shoe Perks customer loyalty program, approximates three-quarters Caucasian and one-quarter African American, Hispanic, or Asian and is more female than male.

In our corporate leadership roles (senior director-level employees through our named executive officers), the portion identifying as female has significantly increased over the last three years from 5% to 26%.

Our human resources, marketing, and supply chain departments as well as portions of our merchandising and technology departments are led by females.

As of January 29, 2022, our workforce identified as 63% female and 37% male.

Our broad-based leadership team, including those who manage and lead our stores and those who lead our Company, identified as 60% female and 40% male.

With respect to ethnicity, our leadership team identified as 60% Caucasian and 40% non-Caucasian.

The diversity of our leadership team trends with the diversity of our customer base, which based on recent data from our Shoe Perks customer loyalty program, approximates two-thirds Caucasian and one-third African American, Hispanic, or Asian and is more female than male.

Our human resources, marketing, and supply chain departments, as well as portions of our merchandising and technology departments, are led by those that identify as female.

At the Board level, we are also focused on increasing our diversity.

Currently 20% of our non-employee Board members is female.

We are currently refreshing our Board and assessing long-term succession as well as the diversity of the Board’s collective skill set.

In fiscal 2019, a board member rolled off the Board as his term expired, creating space for new candidates who will enhance our diversity.

Our short-term goal is to achieve 40% diversity in our non-employee Board members by the end of fiscal 2021.

Currently 40% of our non-employee Board members are female, up from 20% last year.

We are continuing to refresh our Board and assess long-term succession as well as the diversity of the Board’s collective skill set.

In fiscal 2021 and 2020, two total board members exited our Board as their terms expired, creating space for new directors who have enhanced our diversity.

We believe our employee-centric culture not only supports higher levels of execution and performance, but also has led to increased retention of key talent.

We take great pride in our store-level training programs that provide the foundation for long-term careers and our ability to promote from within.

Currently, all of the general managers who operate our stores and 85% of our district managers who oversee those general managers were trained, developed, and promoted from within.

As of January 30, 2021, of our 26 district managers, 81% have been employed by Shoe Carnival for more than 20 years.

The average tenure of the general managers who operate our 383 stores was 13 years as of fiscal 2020 year end.

Individuals who comprise our leadership team, which includes our named executive officers, vice presidents and senior director-level employees, have been employed by Shoe Carnival for an average of 18 years.

We are proud to support the first-time jobs for many of our associates where they gain workforce experiences that may grow into long-term careers with us, with others, or the skills to open their own business.

Currently, all of the general managers who operate our Shoe Carnival bannered stores and 90% of our district managers who oversee those general managers were trained, developed, and promoted from within.

As of January 29, 2022, of our 28 district managers, 64% have been employed for more than 20 years.

The average tenure of the general managers who operate our Shoe Carnival bannered stores was 13 years as of fiscal 2021 year end.

Employee Benefits

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Our broad-based training program also engages and educates our employees on the following key topics:

Non-discrimination and anti-harassment, including the value of diversity and awareness of unconscious bias in all aspects of the employment relationship;

Code of Business Conduct and Ethics (“Code of Ethics”);

Non-discrimination and anti-harassment, including the value of diversity and awareness of bias in all aspects of the employment relationship;

Cybersecurity awareness and responsibility;

Supply chain security.

Business code of conduct.

More information regarding our approach to conducting business responsibly, including our guidelines on discrimination and harassment, can be found in our Code of Business Conduct and Ethics (“Code of Ethics”).

More information regarding our approach to conducting business responsibly, including our guidelines on discrimination and harassment, can be found in our Code of Ethics.

Our Code of Ethics applies to all of our Board members, officers and employees, including our principal executive officer, our principal financial officer, and our principal accounting officer.

The Code of Ethics is posted on our website at investors.shoecarnival.com/governance/ governance-documents .

Our Code of Ethics is posted on our website at investors.shoecarnival.com/governance/governance-documents.

We intend to disclose any amendments to the Code of Ethics by posting such amendments on our website.

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We strive to provide our associates with a safe and healthy work environment.

Our Safety Committee works across the Company and with leadership at all levels and regularly reports to management.

We evaluate conditions and incidents on an ongoing basis, developing lessons learned and documenting actions taken to safeguard our personnel.

We measure OSHA recordable incidents to gauge the success of our safety protocol.

During calendar year 2020, we recorded 49 OSHA recordable incidents, an approximate 25% reduction in incidents compared to just two years ago.

During calendar year 2021, we recorded 51 non COVID-related OSHA recordable incidents, an approximate 20% reduction in incidents compared to three years ago.

Our strategies to address the ever-expanding complexities of protecting customer and employee data and executing our business strategies in an increasingly digital world continue to advance.

Our Security Committee monitors and tests compliance with our protocols, provides regular updates to employees and management, and conducts annual training.

Our technology department monitors and regularly tests compliance with our protocols, provides regular updates to employees and management, and conducts annual training.

Number of Employees

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None of our employees are represented by a labor union.

Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores.

The timing and actual amount of expense recorded in closing a store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the amount of any lease buyout.

Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur closing costs related to the closure of existing stores.

We have three distinct peak selling periods:

Easter, back-to-school and Christmas.

To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year.

Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability.

Our operating results depend significantly upon the sales generated during these periods.

For a discussion of the impact of seasonality on our operating results and our business, see PART II, ITEM 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Impact of Store Count and Seasonality on Quarterly Results.”

We own the following federally registered trademarks and service marks:

Shoe Carnival ® and associated trade dress and related logos, Y-NOT?

® , UNR8ED ® , Solanz ® , Shoe Perks ® , SC Work Wear ® , When You Want To 2 ® , A Surprise In Store ® , Shoes 2U ® , Laces for Learning ® and Princess Lacey’s Laces ® .

® , UNR8ED ® , Solanz ® , Shoe Perks ® , SC Work Wear ® , When You Want To 2 ® , A Surprise In Store ® , Shoes 2U ® , Laces for Learning ® , Princess Lacey’s Laces ® , Shoe Station ® , Shoe Station Super Store ® and Shoe Station Select ® .

We believe these marks are valuable and, accordingly, we intend to maintain the marks and the related registrations.

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Available Information

We make available free of charge through the investor relations portion of our website at www.shoecarnival.com our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

We have included our website address throughout this filing as textual references only.

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Chairman of the Board and Director

Vice Chairman, Chief Executive Officer and Director

President and Chief Customer Officer

Vice Chairman of the Board and Director

President and Chief Executive Officer and Director

Kerry Jackson

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Executive Vice President - Chief Retail Operations Officer

Vice President, Chief Accounting Officer, Corporate Controller and Assistant Secretary

Vice President, Chief Accounting Officer, Corporate Controller and Secretary

Weaver has served as Chairman of the Board since March 1988.

From 1978 until February 2, 1993, Mr.

Weaver had served as President and Chief Executive Officer of Nine West Group, Inc., a designer, developer and marketer of women’s footwear.

He has over 50 years of experience in the footwear industry.

Weaver is a former Director of Nine West Group, Inc.

Weaver served as Chairman and Chief Executive Officer of

Jacksonville Jaguars, LTD, a professional football franchise, until January 2012.

Weaver served as Chairman and Chief Executive Officer of Jacksonville Jaguars, LTD, a professional football franchise, until January 2012.

Weaver previously served two terms as a Director of Stein Mart, Inc., a publicly traded chain of off-price retail stores, from June 2014 until March 2016 and from November 2000 until April 2008.

Sifford has been employed as Vice Chairman since September 2019 and has served as Chief Executive Officer and a Director since October 2012.

Sifford also served as President from October 2012 to September 2019.

Sifford has been employed as Vice Chairman of the Board since October 1, 2021.

From September 2019 to September 30, 2021, Mr.

Sifford served as Vice Chairman of the Board and Chief Executive Officer.

Sifford also served as President and Chief Executive Officer from October 2012 to September 2019 and has been a Director since

October 2012.

Sifford served as Chief Merchandising Officer from October 2012 to March 2016.

From June 2001 to October 2012, Mr.

Sifford served as Executive Vice President – General Merchandise Manager and from April 1997 to June 2001, Mr.

Sifford served as Senior Vice President – General Merchandise Manager.

Sifford served as Executive Vice President –

General Merchandise Manager and from April 1997 to June 2001, Mr.

Sifford served as Senior Vice President –

General Merchandise Manager.

Prior to joining us, Mr.

Sifford served as Merchandise Manager – Shoes for Belk, Inc.

Worden has been employed as President and Chief Customer Officer since September 2019.

Sifford served as Merchandise Manager –

Shoes for Belk, Inc.

Worden has been employed as President and Chief Executive Officer and a Director of the Company since October 1, 2021.

From September 2019 to September 30, 2021, Mr.

Worden served as Executive Vice President – Chief Strategy and Marketing Officer.

Prior to joining us, Mr.

Worden served as President and Chief Customer Officer and from September 2018 to September 2019, Mr.

Worden served as Executive Vice President –

Chief Strategy and Marketing Officer.

Prior to joining the Company, Mr.

Worden led the Northern European region for S.

Johnson & Son, Inc.

(“SC Johnson”), a manufacturer of household cleaning supplies and products, and was responsible for revenue and share growth objectives across six countries from May 2014 to July 2018.

Prior to that, Mr.

Worden served as Assistant to the Chairman and Chief Executive Officer of SC Johnson from May 2012 to May 2014 and as a Senior Marketing Director from 2009 to 2012.

Worden also served as a Senior Brand Manager at Kimberly-Clark Corporation and held multiple marketing roles across their flagship brands during his tenure there from 2003 through 2009.

Worden also served as a Senior Brand Manager at Kimberly-Clark Corporation and held multiple marketing roles across its flagship brands during his tenure there from 2003 through 2009.

Jackson has been employed as Senior Executive Vice President, Chief Financial and Administrative Officer and Treasurer since September 2019.

From October 2012 to September 2019, Mr.

Jackson served as Senior Executive Vice President – Chief Operating and Financial Officer and Treasurer.

Jackson served as Senior Executive Vice President –

Chief Operating and Financial Officer and Treasurer.

From August 2004 to October 2012, Mr.

Jackson served as Executive Vice President – Chief Financial Officer and Treasurer.

Jackson served as Executive Vice President –

Chief Financial Officer and Treasurer.

From June 2001 to August 2004, Mr.

Jackson served as Senior Vice President – Chief Financial Officer and Treasurer.

Jackson served as Senior Vice President –

Chief Financial Officer and Treasurer.

From September 1996 to June 2001, Mr.

Jackson served as Vice President – Chief Financial Officer and Treasurer.

Jackson served as Vice President –

Chief Financial Officer and Treasurer.

From January 1993 to September 1996, Mr.

Jackson served as Vice President – Controller and Chief Accounting Officer.

Jackson served as Vice President –

Controller and Chief Accounting Officer.

Prior to January 1993, Mr.

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He is a Certified Public Accountant.

Scibetta has been employed as Senior Executive Vice President – Chief Merchandising Officer since March, 2021.

Scibetta has been employed as Senior Executive Vice President –

Chief Merchandising Officer since March 2021.

From March 2016 to March 2021, Mr.

Scibetta serviced as Executive Vice President – Chief Merchandising Officer.

Scibetta serviced as Executive Vice President –

Chief Merchandising Officer.

From December 2012 to March 2016, Mr.

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Prior to joining us, Mr.

Scibetta served as Vice President, Divisional Merchandise Manager– Footwear for Belk, Inc.

Scibetta served as Vice President, Divisional Merchandise Manager–

Footwear for Belk, Inc.

From 2004 to 2007, Mr.

Scibetta served as Vice President, Divisional Merchandise Manager – Footwear for Parisian Department Stores.

Scibetta served as Vice President, Divisional Merchandise Manager –

Footwear for Parisian Department Stores.

From 1998 to 2000, Mr.

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Scibetta began his retail career with Wohl Shoe Company in 1980.

Baker has been employed as Executive Vice President – Chief Retail Operations Officer since September 2019.

From June 2001 to September 2019, Mr.

Baker served as Executive Vice President – Store Operations.

From March 1994 to June 2001, Mr.

Baker served as Senior Vice President – Store Operations.

From May 1992 to March 1994, Mr.

Baker served as Vice President – Store Operations.

Prior to that time, he served as one of our regional managers.

From 1983 to June 1989, Mr.

Baker held various retail management positions with Payless ShoeSource.

Edwards has been employed as Vice President, Chief Accounting Officer, Corporate Controller and Assistant Secretary since March 2021.

Chilton has been employed as Executive Vice President –

Chief Retail Operations Officer since April 2021.

From February 2020 to April 2021, Mr.

Chilton served as our Senior Vice President –

Store Administration and Development and from March 2019 to February 2020 served as our Senior Vice President –

Store Operations and Administration.

Chilton started with the Company in 1994 as a store manager and has served in roles of increasing responsibility in store management and operations since that time, including serving as the Vice President of our Northern Division, with approximately one-third of our stores reporting to him, from April 2012 until March 2019.

Edwards has been employed as Vice President, Chief Accounting Officer, Corporate Controller since March 2021.

He has also served as our Secretary since June 2021 and as our Assistant Secretary from December 2019 to June 2021.

From October 2019 to March 2021, Mr.

Edwards served as our Vice President and Corporate Controller and as our Assistant Secretary since December 2019.

Edwards served as our Vice President and Corporate Controller.

Prior to joining us, Mr.

Edwards was Vice President of Accounting for CenterPoint Energy, Inc.

(“CenterPoint”) from February 2019 to August 2019 following its acquisition of Evansville, Indiana-based Vectren Corporation (“Vectren”).

from February 2019 to August 2019 following its acquisition of Vectren Corporation (“Vectren”).

For Vectren, Mr.

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There is no family relationship between any of our Directors or executive officers.

Chief Executive Officer Succession

In March 2021, our Board unanimously elected Mr.

Worden as our next President and Chief Executive Officer, effective September 30, 2021.

Worden will succeed Mr.

Sifford, who will step down as our Chief Executive Officer effective September 30, 2021, but will continue to serve in the role of Vice Chairman of the Board of Directors and, in such role, will continue as an employee.

Chief Retail Operations Officer Succession

Effective April 2021, Marc A.

Chilton will succeed Mr.

Baker as our Executive Vice President – Chief Retail Operations Officer.

Baker is stepping away after 32 years as our operations leader.

Chilton, age 51, served as our Senior Vice President – Store Operations and Administration from March 2019 until February 2020, after which he has served as Senior Vice President – Store Administration and Development.

Chilton started with us in 1994 as a store manager and has served in roles of increasing responsibility in store management and operations since that time, including serving as the Vice President of our Northern Division, with approximately one-third of our stores reporting to him, from April 2012 until March 2019.

R isk Factors

Carefully consider the following risk factors and all other information contained in this Annual Report on Form 10-K before making an investment decision with respect to our common stock.

Investing in our common stock involves a high degree of risk.

If any of the following risks actually occur, we may not be able to conduct our business as currently planned and our financial condition and operating results could be materially and adversely affected.

See PART I “Cautionary Statement Regarding Forward-Looking Information”

at the beginning of this Annual Report on Form 10-K.

Our risk factors are categorized as follows:

Operational and Strategic Risks, Compliance and Litigation Risks, Human Capital Risks, Financial and Liquidity Risks and Risks Relating to the Ownership of Our Common Stock.

Operational and Strategic Risks

Adverse impacts on consumer spending may significantly harm our business.

The success of our business depends to a significant extent upon the level of consumer spending.

A number of factors may affect the level of consumer spending on merchandise that we offer, including, among other things:

war, terrorism, civil unrest, other hostilities and security concerns;

the timing and level of government stimulus payments;

energy costs, which affect gasoline and home heating prices;

general economic and industry conditions;

unemployment trends and salaries and wage rates;

the level of consumer debt;

consumer credit availability;

real estate values and foreclosure rates;

consumer confidence in future economic conditions;

interest rates;

health care costs;

tax rates, policies and timing and amounts of tax refunds;

natural disasters, changing weather patterns and catastrophic events.

The merchandise we sell generally consists of discretionary items.

Adverse economic conditions and macroeconomic uncertainty, and any related decrease in consumer confidence and spending may result in reduced consumer demand for discretionary items.

Federal stimulus payments made directly to consumers as a result of the COVID-19 pandemic likely had a positive impact on our net sales, including in fiscal 2021.

The amount of any future stimulus payments and duration of the impact of such payments is uncertain, and our sales and profitability may decline in future periods.

Furthermore, the increasing conflict between Russia and Ukraine and/or rising inflation could also erode consumer confidence and lead to lower levels of discretionary income for our customers and reduce the demand for our merchandise.

Reduced consumer demand could result in reduced traffic in our physical stores and to our e-commerce platform;

limit the prices we can charge for our merchandise;

result in inventory markdowns and increased selling and promotional expenses;

and cause us to close underperforming stores, which could result in higher than anticipated closing costs.

Any of these impacts could have an adverse effect on our business, results of operations and financial condition.

The COVID-19 pandemic has adversely impacted, and may continue to adversely impact, our business and our results of operations.

Our operations and the markets in which we operate, procure merchandise and raise capital are continuing to experience significant disruption and financial market volatility associated with the outbreak of a novel strain of

coronavirus (“COVID-19”).

The World Health Organization has declared COVID‑19 a pandemic.

Government, as well as state and local governments, have taken unprecedented measures to control the spread of COVID-19 and to provide stimulus as a mitigating measure to deteriorating economic conditions and increasing unemployment.

Many businesses, schools, and other institutions closed, or adjusted operations, to further the practice of “social distancing”

as a method to slow the outbreak.

Our business and results of operations were significantly impacted by the temporary closure of our physical stores in the first quarter of fiscal 2020.

As guidance and mandates from governments and public health officials continue to evolve, closures to some, or all, of our store and other operations may reoccur.

In addition, our stock price and the stock prices of our peer companies have been volatile.

The extent of the continued impact of the COVID‑19 pandemic on our operational and financial performance will depend on future developments, including, but not limited to:

the duration and spread of the outbreak in the areas in which we operate and whether there are additional periods of increases or spikes in the number of such cases in future periods;

mitigating efforts deployed by government agencies and the public at large, including vaccine or testing mandates;

the development, pace of distribution, and effectiveness of vaccines and therapeutic treatments;

the general perception of those mitigating efforts where we operate, procure merchandise and raise capital.

Should the COVID-19 pandemic lead to further temporary closures of our physical stores;

financial market volatility;

adverse changes in economic conditions;

adverse changes in consumer spending;

increased operational risks;

and/or further disruptions to our supply chain and distribution processes, our costs may increase, our sales and gross profit may decline and our stock price may decrease, any of which could negatively impact our results of operations, cash flows, and financial condition.

Our customers and store employees are exposed to certain COVID-19-related safety risks at our physical stores.

While we have taken measures to control these risks, the unpredictable nature of COVID-19 may result in unexpected outcomes.

For example, if the established protocols cease to be effective, or are not followed, the health and safety of our employees and customers could be at risk.

A future outbreak in our stores, distribution center, or corporate headquarters could result in temporary or sustained workforce shortages or store or facility closures.

Inadequate response by us, perceived or otherwise, could impact our costs, our reputation, and/or our ability to recruit a qualified workforce.

An increase in the cost, or a disruption in the flow, of imported goods may decrease our sales and profits.

We rely on imported goods to sell in our stores.

Substantially all of our footwear product is manufactured overseas, including the merchandise we import directly from overseas manufacturers and the merchandise we purchase from domestic vendors.

Our primary footwear manufacturers are located in China.

Currently, most retailers, including us, are experiencing some form of disruption in their supply chains involving goods imported from Asian countries.

To date, such disruption has increased our costs but has not materially impacted our access to merchandise;

however, should the disruption continue or worsen, it may further increase the cost of the goods we purchase, limit our ability to acquire merchandise, and decrease our sales and profits.

If imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands.

Products from alternative sources may be of lesser quality and more expensive than those we currently import.

Other risks associated with our use of imported goods include:

disruptions in the flow of imported goods because of factors such as electricity or raw material shortages, work stoppages, strikes, political unrest, war, pandemics and natural disasters;

tariffs, import duties, import quotas, anti-dumping duties, and other trade sanctions;

modifications to international trade policy and/or existing trade agreements and other changes affecting United States trade relations with other countries;

problems with oceanic shipping, including shipping container shortages and piracy;

port congestion at arrival ports causing delays;

additional oceanic shipping costs to reach non-congested ports;

inland transit costs and delays resulting from port congestion;

economic crises and international disputes;

currency exchange rate fluctuations;

increases in the cost of purchasing or shipping foreign merchandise resulting from the failure to maintain normal trade relations with source countries;

increases in shipping rates imposed by the trans-Pacific shipping cartel;

compliance with the laws and regulations, and changes to such laws and regulations, in the United States and the countries where our manufacturers are located, including but not limited to requirements relating to shipping security, product safety testing, environmental requirements and anti-corruption laws.

We may experience difficulties in integrating the Shoe Station business and realizing the expected operating results, growth opportunities and other benefits of the acquisition.

The success of the Shoe Station acquisition will depend, in part, on our ability to realize the expected operating results, growth opportunities and other benefits from acquiring the Shoe Station assets.

We may not realize these operating results, growth opportunities or other benefits within the expected time frames, or at all.

The acquisition may disrupt our current plans and operations and may negatively impact our relationship with our vendors and other key suppliers.

The attention of our management may be diverted from our current operations while trying to integrate the Shoe Station business.

We may not be able to successfully integrate Shoe Station’s operations, logistics, information technologies, communications, purchasing, accounting, marketing, administration and other systems, establish internal controls into Shoe Station’s operations or retain key Shoe Station employees.

The acquired Shoe Station business may underperform relative to our expectations.

Any of these impacts could have an adverse effect on our growth opportunities, business, results of operations and financial condition.

We face significant competition in our markets, and we may be unable to compete favorably.

The retail footwear industry is highly competitive with few barriers to entry.

We compete primarily with department stores, shoe stores, sporting goods stores, e-commerce retailers and mass merchandisers.

Many of our competitors are significantly larger and have substantially greater resources than we do.

Economic pressures or bankruptcies of our competition could result in increased pricing pressures.

This competition could adversely affect our results of operations and financial condition in the future.

Our failure to identify fashion trends could result in lower sales, higher markdowns and lower gross profits.

Our success depends upon our ability to anticipate and react to the fashion tastes of our customers and provide merchandise that satisfies consumer demand.

Our failure to anticipate, identify or react appropriately to changes in consumer fashion preferences may result in lower sales, higher markdowns to reduce excess inventories and lower gross profits.

Conversely, if we fail to anticipate or react to consumer demand for our products, we may experience inventory shortages, which would result in lost sales and could negatively affect our customer goodwill, our brand image and our profitability.

Moreover, our business relies on continuous changes in fashion preferences.

Stagnating consumer preferences could also result in lower sales and would require us to take higher markdowns to reduce excess inventories.

Failure to successfully manage and execute our marketing initiatives could have a negative impact on our business .

Our success and growth are partially dependent on generating customer traffic in order to gain sales momentum in our physical stores and drive traffic to our e-commerce platform.

Successful marketing efforts require the ability to reach customers through their desired mode of communication, utilizing various media outlets.

Media placement decisions are generally made months in advance of the scheduled release date.

Our inability to accurately predict our customers’

preferences, to utilize their desired mode of communication, or to ensure availability of advertised products could adversely affect our business and results of operations.

In addition, our competitors may spend more on marketing or use different marketing approaches, which could provide them with a competitive advantage.

Our failure to effectively manage our real estate portfolio may negatively impact our results of operations.

Effective management of our real estate portfolio is critical to our omnichannel strategy.

All of our stores are subject to leases and are primarily located in open-air shopping centers.

If we fail to effectively implement our real estate strategies or negotiate appropriate lease terms or if unforeseen changes arise, the consequences could have an adverse effect on our profitability, cash flows and liquidity.

The financial impact of exiting a leased location can vary greatly depending on, among other factors, the terms of the lease, the condition of the local real estate market, demand for the specific property and our relationship with the landlord, and influencing these factors is difficult.

In addition to rent, we could still be responsible for the maintenance, taxes, insurance and common area maintenance (“CAM”) charges for vacant properties until the lease commitment expires or is terminated.

We locate our stores primarily in open-air shopping centers where we believe our customers and potential customers shop.

The success of an individual store can depend on favorable placement within a given open-air shopping center and the volume of traffic generated by the other destination retailers and the anchor stores in the open-air shopping centers where our stores are located.

We cannot control the development of alternative shopping destinations near our existing stores or the availability or cost of real estate within existing or new shopping destinations.

If one or more of the destination retailers or anchor stores located in the open-air shopping centers where our stores are located close or leave, or if there is significant deterioration of the surrounding areas in which our stores are located, our business may be adversely affected.

In addition, if our store locations fail to attract sufficient customer traffic or we are unable to locate replacement locations on terms acceptable to us, our business could suffer.

Various risks associated with our e-commerce platform may adversely affect our business and results of operations.

E-commerce has been a rapidly growing sales channel and an increasing source of competition in the retail industry.

We sell shoes and related accessories through our website at www.shoecarnival.com and our related mobile app.

We fulfill substantially all e-commerce orders from our store locations and from our distribution center.

If we are unable to maintain recent market share gains in our e-commerce sales or continue to grow our e-commerce sales, our sales, comparable store sales and gross profit may decline, and our stock price may decrease, any of which could negatively impact our results of operations, cash flows, and financial condition.

Our e-commerce operations are subject to numerous other risks that could have an impact on our results of operations, including:

unanticipated operating problems;

reliance on third-party computer hardware, software and service providers;

the need to continually invest in technology and security;

our ability to hire, retain and train personnel to conduct our e-commerce operations;

diversion of sales from our physical stores;

our ability to manage any upgrades or other technological changes;

our ability to provide customer-facing technology systems, including mobile technology solutions, that function reliably and provide a convenient and consistent experience for our customers;

exposure to potential liability for online content;

risks related to the failure of the computer systems that operate our e-commerce platform and the related support systems, including computer viruses, telecommunication failures and cyberattacks and break-ins and similar disruptions;

security risks related to our electronic processing and transmission of confidential customer information.

Any significant interruptions in the operations of our third-party providers, over which we have no control, could have an adverse effect on our e-commerce business.

Any breach involving our customer information could harm our reputation or result in liability including, but not limited to, fines, penalties and costs of litigation, any of which could have an adverse effect on our operating results, financial condition and cash flows.

A failure to increase sales at our existing stores may adversely affect our stock price and affect our results of operations.

A number of factors have historically affected, and will continue to affect, our comparable store sales results, including:

timing of holidays, including sales tax holidays;

general regional and national economic conditions, including inflation;

inclement weather and/or unseasonable weather patterns;

consumer trends, such as less disposable income due to the impact of higher prices on consumer goods;

fashion trends;

changes in our merchandise mix;

our ability to efficiently distribute merchandise;

timing and type of, and customer response to, sales events, promotional activities or other advertising;

the effectiveness of our inventory management;

new merchandise introductions;

our ability to execute our business strategy effectively.

Our comparable store sales results have fluctuated in the past, and we believe such fluctuations may continue.

The unpredictability of our comparable store sales may cause our revenue and results of operations to vary from quarter to quarter, and an unanticipated decline in revenues or operating income may cause our stock price to fluctuate significantly.

Members in our Shoe Perks customer loyalty program account for a significant portion of our sales, and any material decline in sales from our Shoe Perks members could have an adverse impact on our results of operations.

We believe our Shoe Perks rewards program provides our customers with a heightened shopping experience, which includes exclusive offers and personalized messaging.

Rewards are earned by making purchases and participating in other point earning opportunities that facilitate engagement with our brand.

We remain focused on expanding our Shoe Perks enrollment.

If our Shoe Perks members do not continue to shop with us, our sales may be adversely affected, which could have an adverse impact on our results of operations.

We may not be able to successfully execute our growth strategy, which could have an adverse effect on our business, financial condition and results of operations.

We intend to continue to invest in our omnichannel initiatives, which requires substantial investment in technology.

Our growth strategy requires that we continue to expand and improve our operating and financial systems and expand, train and manage our employee base.

In addition, as we create more opportunities to connect with our customers through our omnichannel initiatives and as we adjust the number of our physical stores, we may be unable to hire a sufficient number of qualified personnel or successfully integrate the omnichannel initiatives or new or acquired stores into our business.

If we fail to successfully implement our growth strategy, our business, financial condition or results of operations could be adversely effected.

The success of our growth strategy will depend on a number of other factors, many of which are out of our control, including, among other things:

the acceptance of our banners and concepts in new markets;

our ability to provide adequate distribution to support growth;

our ability to source sufficient levels of inventory;

our ability to resolve downtime or technical issues related to our e-commerce platform, our order management and fulfillment systems, and all other related systems that support our omnichannel strategy;

our ability to execute omnichannel advertising and marketing campaigns to effectively communicate our message to our customers and our employees;

our ability to locate suitable store sites and negotiate store leases (for new stores and renewals) on favorable terms;

particularly if we expand into new markets, our ability to open a sufficient number of new stores to provide the critical mass needed for efficient advertising and effective brand recognition;

the availability of financing for capital expenditures and working capital requirements;

our ability to improve costs and timing associated with opening new stores;

the impact of new stores on sales or profitability of existing stores in the same market.

We depend on our key suppliers for merchandise and advertising support and the loss of key suppliers could adversely affect our business.

Our business depends upon our ability to purchase fashionable, name brand and other merchandise at competitive prices from our suppliers.

Two branded suppliers, Nike, Inc.

and Skechers USA, Inc., collectively accounted for approximately 39% of our net sales in fiscal 2021 and approximately 43% in fiscal 2020 (Nike, Inc.

approximately 28% in fiscal 2021 and 33% in fiscal 2020 and Skechers USA, Inc.

approximately 11% in fiscal 2021 and 10% in fiscal 2020).

Name brand suppliers also provide us with cooperative advertising and visual merchandising funds.

Certain key suppliers’

business models are changing and such changes include, but are not limited to, increased direct-to-consumer initiatives, changes in planned product allocations, and reductions in the number of retailers with which they are choosing to do business.

A loss of any of our key suppliers in certain product categories or our inability to obtain name brand or other merchandise from suppliers at competitive prices could have an adverse effect on our business.

As is common in the industry, we do not have any long‑term contracts with our suppliers.

We may not be able to identify or consummate future acquisitions or achieve expected benefits from or effectively integrate future acquisitions.

From time to time, we expect to evaluate selective acquisitions and strategic investments.

Future acquisitions involve many risks that could have an adverse effect on our business, results of operations or financial condition, including:

our ability to identify suitable acquisition candidates, prevail against competing potential acquirers and negotiate and consummate acquisitions on terms attractive to us;

any acquired business not achieving anticipated revenues, earnings, cash flow or market share;

the potential loss of key employees, vendors or suppliers of the acquired company or adverse effects on our existing relationships with our vendors and suppliers;

the failure of our due diligence procedures to detect material issues related to the acquired business, including exposure to legal claims for activities of the acquired business prior to the acquisition;

unexpected liabilities resulting from the acquisition for which we may not be adequately indemnified;

the integration of the personnel, operations, logistics, information technologies, communications, purchasing, accounting, marketing, administration and other systems and the establishment of internal controls into the acquired company’s operations;

the diversion of management attention and financial resources from our current operations;

the potential incurrence of debt to fund an acquisition;

any unforeseen management and operational difficulties;

incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges and write-offs of significant amounts of goodwill or other assets that could adversely affect our financial results.

Our inability to achieve the anticipated benefits of any future acquisitions and other investments could adversely affect our business, results of operations and financial condition.

Natural disasters, other public health crises, political crises and other catastrophic events or other events outside of our control may damage our facilities or the facilities of third parties on which we depend and could impact our supply chain and access to customers.

Our facilities, including our distribution center, our corporate headquarters and our retail stores, and the facilities of our third-party vendors and service providers could suffer if affected by:

natural disasters, such as fires, earthquakes, explosions, hurricanes, power shortages or outages, floods, monsoons, ice storms or tornadoes;

other public health crises such as pandemics and epidemics;

political crises such as terrorism, war, political instability, civil unrest or other conflict;

other events outside of our control.

Disasters occurring at our distribution center, our corporate headquarters, our retail stores, or the infrastructure of a key third-party vendor or service provider also could result in us being unable to deliver merchandise to our stores or directly to customers for a prolonged period and could impact our reputation and our customers’

perception of our brand.

In the event of a severe disruption resulting from such events, we have contingency plans and employ crisis management to respond and recover operations.

Despite these measures, if such an occurrence were to occur, our results of operations and financial condition could be adversely affected.

We could be adversely affected if our information technology systems fail to operate effectively, are disrupted or are compromised.

We rely on our existing information technology systems in operating and monitoring major aspects of our business, including sales, warehousing, distribution, purchasing, inventory control, merchandise planning and replenishment, point-of-sale support and financial systems.

We regularly make investments to upgrade, enhance or replace our systems as well as leverage new technologies to support our operational strategies.

Any delays or difficulties with such projects could have an adverse effect on our operational results, financial position and cash flows.

The reliability and capacity of our information technology systems, and in particular our distribution technology operations, are critical to our continued operations.

We currently operate a single distribution center in Evansville, Indiana.

Virtually all merchandise received by our physical stores is, and will be, shipped through our distribution center.

We fulfill substantially all of our e-commerce orders from our store locations and our distribution center.

Our corporate computer network is essential to our distribution process.

Despite our precautionary efforts, our information technology systems are vulnerable from time to time to damage or interruption from, among other things, natural or man-made disasters, technical malfunctions, inadequate systems capacity, power outages, terrorist attacks, computer viruses and security breaches, which may require significant investment to fix or replace.

If our distribution center is shut down for any reason, if our information technology systems do not operate effectively, or if we are the target of attacks or security breaches, we may suffer the loss of critical data, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores, our ability to operate our e-commerce platform may be impacted, and we could experience other interruptions or delays to our operations, which could have an adverse effect on our operating and financial performance.

We outsource certain business processes to third-party vendors and have certain business relationships that subject us to risks, including disruptions to our business and increased costs.

We rely on third-party suppliers for our merchandise and outsource some of our business processes to third-party vendors.

Our relationships with these business partners expose us to risks, including disruptions in our business and increased costs.

In addition, other matters involving our business partners could have an adverse effect on our business and financial results.

These include, but are not limited to:

changes in the public’s perception of the reputation and brand of the business partner as a result of matters such as its labor and wage standards, business practices or marketing campaigns;

our inability to properly manage a business partner;

any data losses or information security lapses by a business partner that results in the compromise of personal information or the improper use or disclosure of sensitive information;

any misconduct by a business partner involving matters such as fraud or other improper or unethical activities conducted by the business partner or its non-compliance with our policies and procedures or with laws and regulations, including laws and regulations regarding the use and safeguarding of information, labor practices, environmental, health or safety matters and lobbying or similar activities.

Failure of our business partners to provide adequate services or our inability to arrange for alternative providers on favorable terms in a timely manner could disrupt our business, increase our costs or otherwise adversely affect our business and our financial results.

Failure to maintain positive brand perception and recognition could have a negative impact on our business.

Maintaining a good reputation is critical to our business.

In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites and other forms of internet-based communications that provide access to a broad audience of consumers and other persons.

The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination.

If we are unable to quickly and effectively respond to the dissemination of negative information about us via social media or any other incidents negatively impacting our reputation and brand, we may suffer declines in customer loyalty and traffic and we may experience vendor relationship issues and other issues, regardless of the information’s accuracy, all of which could negatively affect our financial results.

In addition, we frequently use social media to communicate with customers and the public in general.

Failure to use social media effectively could negatively impact our brand value and revenues.

Emerging technologies may create disruption to the retail industry.

New and emerging technology may enable new approaches or choices for how our customers procure goods and services and pay for those goods and services.

We may be unable to quickly adapt to rapid change resulting from artificial intelligence, blockchain, Internet of Things, including voice and smart home devices, and other advanced technologies that may result in changes to our supply chain, distribution channels, and point-of-sale capabilities.

Our quarterly operating results can fluctuate due to seasonality, weather conditions and other factors.

Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances, weather conditions and the timing of sales and costs associated with opening new stores and closing existing stores.

We have three distinct peak selling periods:

Easter, back-to-school and Christmas.

To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year.

Reductions in demand for our merchandise during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and margins and negatively affect our profitability.

Our operating results depend significantly upon the sales generated during these periods, and our quarterly results may be impacted by calendar shifts of holiday or seasonal periods.

We also increase our inventory levels to offer styles particularly suited for the relevant season, such as sandals in the early summer season and boots during the winter season.

If the weather conditions for a particular season vary significantly from those typical for such season, such as an unusually cold early summer or an unusually warm winter, consumer demand for the seasonally appropriate merchandise that we have available in our stores could be adversely affected and negatively impact net sales and margins.

Lower demand for seasonally appropriate merchandise may leave us with an excess inventory of our seasonally appropriate products, forcing us to sell these products at significantly discounted prices and adversely affecting our net sales margins and operating cash flow.

Conversely, if weather conditions permit us to sell our seasonal product early in the season, this may reduce inventory levels needed to meet our customers’

needs later in that same season.

Consequently, our results of operations are highly dependent on somewhat predictable weather conditions and our ability to react to changes in weather conditions.

Other factors that may affect our quarterly results of operations include:

fashion trends;

the timing and amount of income tax refunds to customers;

the effectiveness of our inventory management;

changes in general economic conditions, including inflation and consumer spending patterns;

actions of competitors or co-tenants.

If our future quarterly results fail to meet the expectations of research analysts, then the market price of our common stock could decline substantially.

We are exposed to physical and financial risks related to the uncertainty of climate change.

A changing climate creates uncertainty and could result in broad changes, both physical and financial in nature, to our retail, distribution, and corporate locations.

These impacts could include, but are not limited to:

population shifts;

changes in the level of annual rainfall;

changes in the overall average temperature;

changes to the frequency and severity of weather events such as hurricanes and other wind related events, thunderstorms, tornadoes, and ice storms that can damage our facilities and impact our supply chain and distribution channels.

Such changes could impact us in a number of ways including limiting available real estate;

changing the demographics of our customer base and employees;

increasing the likelihood of capital expenditures to replace damaged infrastructure;

and increasing the cost of insurance.

Compliance and Litigation Risks

Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigation and damage our reputation.

We receive and maintain certain personal, sensitive and confidential information about our customers, vendors and employees.

The collection and use of this information are regulated and are subject to certain contractual restrictions in third-party contracts.

Non-compliance with these regulations and contractual restrictions may subject us to fines, penalties, restrictions and expulsion from credit card acceptance programs and civil liability.

Although we have implemented processes to collect and protect the integrity and security of this personal information, there can be no assurance that this information will not be obtained by unauthorized persons, or collected or used inappropriately, including as a result of cybersecurity breaches, acts of vandalism, computer viruses, credit card fraud or phishing.

Advanced cybersecurity threats are persistent and continue to evolve, making them increasingly difficult to identify and prevent.

If our security and information systems or the systems of our employees or external business partners are compromised or our employees or external business partners fail to comply with these laws and regulations and this information is obtained by unauthorized persons, or collected or used inappropriately, our reputation, as well as our operations and financial results, could be negatively affected and litigation or regulatory action against us or the imposition of costs, fines or other penalties could also occur.

As privacy and information security laws and regulations change, we may incur additional costs to remain in compliance.

We may not have adequate insurance coverage for all potential liabilities.

Natural risks, as well as other hazards associated with our operations, can result in personal injury, severe damage or destruction to our owned assets, leasehold improvements and inventory, suspension of our operations, and cybersecurity breaches.

Our insurance covers costs relating to specified, limited matters, such as events involving casualty losses and property losses due to fire and windstorms, as well as securities litigation and certain cybersecurity incidents, but does not cover other events such as acts of war or terrorist attacks.

We maintain an amount of insurance protection we believe is appropriate, but there can be no assurance that the amount of insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject.

A claim for which we are not adequately insured could have an adverse effect on our financial condition.

Further, due to the cyclical nature and current hardening of the insurance markets, we cannot provide assurance that insurance coverage will continue to be available on terms similar to those presently in place.

We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources.

We are a defendant from time to time in lawsuits and regulatory actions relating to our business.

Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings.

An unfavorable outcome could have an adverse impact on our business, financial condition and results of operations.

In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require us to devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business.

Human Capital Risks

Our failure to manage key executive succession and retention could adversely affect our business.

We recently completed transitions of key members of our executive management team.

Our business would be adversely affected if we fail to retain key executives, or to adequately plan for the succession of the other members of our executive management team.

While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and we have employment agreements with certain key executive officers, these plans and agreements do not guarantee that the services of our executive officers will continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis.

Our failure to attract and retain qualified personnel could adversely affect our business.

Our business model requires us to train, motivate and manage our employees and to attract, motivate and retain additional qualified managerial and merchandising personnel.

Our ability to control costs and meet our labor needs in a rising wage and inflationary environment is subject to external factors such as unemployment levels, prevailing wage rates paid by those with whom we compete for talent, health care and minimum wage legislation, and changing demographics.

If we are unable to attract and retain quality sales associates and management or market conditions or changes to minimum wage laws result in the need for higher wages paid to employees, our ability to meet growth goals or to sustain expected levels of profitability may be compromised and our financial condition, results of operations and cash flows may be adversely affected.

Financial and Liquidity Risks

We will require significant funds to implement our business strategy and meet our other liquidity needs.

We may not generate sufficient cash flow from operations or obtain sufficient borrowings under our credit facility to finance our business strategy and meet our other liquidity needs.

Failure to generate or raise sufficient funds may require us to modify, delay or abandon some of our future growth or expenditure plans.

We utilize our credit facility to fund working capital, including inventory purchases, and special purpose standby letters of credit, as needed.

Significant decreases in cash flow from operations could result in our borrowing under the credit facility to fund operational needs.

If we borrow funds under our credit facility and interest rates materially increase from present levels, our financial results could be adversely affected.

Continued financial market volatility could have an adverse effect on the sources and costs of financing available to us.

The capital and credit markets have recently experienced, and may continue to experience, volatility and disruption, which could have the following impacts, among other things:

make obtaining other sources of debt more difficult;

increasing our borrowing costs or limiting other potential sources of financing available to us.

If our long-lived assets become impaired, we may need to record significant non-cash impairment charges.

Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, and certain intangible assets, such as goodwill, are evaluated annually regardless of triggering events.

Significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets (such as store relocations or closures) have resulted, and in the future may result, in impairment charges.

Any such impairment charges, if significant, would adversely affect our financial position and results of operations.

Failure to maintain effective internal control over financial reporting could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

We must continue to document, test and evaluate our internal control over financial reporting in order to satisfy the requirements of Section 404 of the

Sarbanes-Oxley Act of 2002, which requires annual reports by management regarding the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to the effectiveness of our internal control over financial reporting.

We have expended, and expect that we will continue to expend, significant management time and resources documenting and testing our internal control over financial reporting.

If we conclude in future periods that our internal control over financial reporting is not effective, it could result in lost investor confidence in the accuracy, reliability and completeness of our financial reports.

Any such events could have an adverse effect on our stock price.

Risks Relating to the Ownership of Our Common Stock

Perception of the overall retail industry and other macroeconomic conditions may impact our stock price and operations.

The retail industry continues to evolve and undergo structural change.

This evolution and structural change has resulted in the bankruptcy and/or reorganization of various footwear specific and other publicly traded retailers.

Despite our best efforts to differentiate our business model and processes, our stock price has fluctuated as a result of perceptions of the overall retail environment and investor confidence in the retail sector.

The volatility in our stock price could be exacerbated by macroeconomic conditions that affect the market generally or our industry in particular and could have the effect of diverting management’s attention and could harm our business.

We cannot provide any assurance that perception of the retail industry overall and other macroeconomic conditions will not continue to impact our stock price or our ability to engage business partners on terms acceptable to us.

Our stock price may be volatile and could decline substantially.

The stock market has, from time to time, experienced extreme price and volume fluctuations.

Many factors may cause the market price for our common stock to decline, including:

operating results failing to meet the expectations of securities analysts or investors in any quarter;

downward revisions in securities analysts’

material announcements by us or our competitors;

the other risk factors cited in this Annual Report on Form 10-K.

The price of our common stock may decline and the value of any investment in our common stock may be reduced regardless of our performance.

In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation.

If we become involved in securities class action litigation in the future, it could result in substantial costs and diversion of management attention and resources, thus harming our business.

We cannot guarantee that we will continue to make dividend payments or that we will continue to repurchase stock pursuant to our stock repurchase program.

Our Board of Directors determines if it is in our best interest to pay a dividend to our shareholders and the amount of any dividend and declares all dividend payments.

In the future, our results of operations and financial condition may not allow for a dividend to be declared or the Board of Directors may decide not to continue to declare dividends.

In addition, our current share repurchase program authorizes the purchase of up to $50 million of our common stock through December 31, 2022.

However, we are not obligated to make any purchases under the share repurchase program and the program may be amended, suspended or discontinued at any time.

We are controlled by our principal shareholders.

Wayne Weaver, our Chairman of the Board of Directors, and his spouse together beneficially own approximately 30.2% of our outstanding common stock.

Weaver’s adult daughter is the sole trustee of the J.

Wayne Weaver 2018 Grantor Retained Annuity Trust for Leigh Anne Weaver, the sole trustee of the J.

Wayne Weaver 2019 Grantor Retained Annuity Trust for Leigh Anne Weaver and the sole trustee of the J.

Wayne Weaver 2020 Grantor Retained Annuity Trust for Leigh Anne Weaver, and, as a result, beneficially owns approximately 5.3% of our outstanding common stock held by such trusts.

Accordingly, the Weaver family is able to exert substantial influence over our management and operations.

In addition, their interests may differ from, or be opposed to, the interests of our other shareholders, and their ownership may have the effect of delaying or preventing a change in control that may be favored by other shareholders.

Provisions of our organizational documents and Indiana law might deter acquisition bids for us.

Our Amended and Restated Articles of Incorporation, our By-Laws and Indiana corporate laws contain provisions that may discourage other persons from attempting to acquire control of us, including, without limitation, a Board of Directors that has staggered terms for its members, supermajority voting provisions, restrictions on the ability of shareholders to call a special meeting of shareholders and procedural requirements in connection with shareholder proposals or director nominations.

The Board of Directors has the authority to issue preferred stock in one or more series without the approval of the holders of our common stock.

Further, Indiana corporate law contains business combination provisions that, in general, prohibit for five years any business combination with a beneficial owner of 10% or more of our common stock unless the holder’s acquisition of the stock was approved in advance by our Board of Directors.

Indiana corporate law also contains control share acquisition provisions that limit the ability of certain shareholders to vote their shares unless their control share acquisition is approved.

In certain circumstances, the fact that corporate devices are in place that inhibit or discourage takeover attempts could reduce the market value of our common stock.

Unresolv ed staff comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business