What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-24 compared with 2022-03-25 · 254 added, 295 removed, 477 unchanged (54% 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 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”

is one of the nation’s largest omnichannel sellers of family footwear.

We operate a retail focused business model that aims to deliver the leading footwear shopping experience with the national name brands desired by our customers.

Our "bricks" first, omnichannel approach provides customers easy access to our wide assortment of branded footwear for work, athletics, daily activities and special events via their choice of delivery channel.

We have a proven track record selling branded footwear, such as Nike, Skechers, adidas, Puma, HEYDUDE, Converse, Vans and Crocs, and generating profits without incurring debt.

We have been in business for 44 years and have been a public company subject to SEC reporting requirements since 1993.

Since 1993, we have earned a profit in every year except one.

We have experienced transformational growth in our business over the last two fiscal years, driven primarily by changes in our marketing and pricing strategies and the consummation and integration of our first acquisition.

Our total Diluted Net Income per Share earned over the past two fiscal years of $9.38 ($3.96 in Fiscal 2022 and $5.42 in Fiscal 2021) exceeded the Diluted Net Income per Share earned over the preceding 13 years combined.

As of our Fiscal 2022 year end, we operated 397 stores across 35 states and Puerto Rico.

Including e-commerce sales in close proximity to a physical store, our comparable physical stores generated an average of $3.2 million in Net Sales in Fiscal 2022 and over $281 in Net Sales per square foot.

We believe there is room within our existing markets to grow our store count to over 500 stores by 2028 through both organic and acquired store growth.

We believe this opportunity to increase our scale, together with stable double-digit operating income margins, will continue to drive shareholder value and our future earnings potential.

In Fiscal 2022, our Net Sales were $1.26 billion and our goal is to be a multi-billion dollar omnichannel retailer by 2028.

Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31.

Referred to herein, Fiscal 2022 is the fiscal year ended January 28, 2023;

Fiscal 2021 is the fiscal year ended January 29, 2022;

Fiscal 2020 is the fiscal year ended January 30, 2021;

and Fiscal 2019 is the fiscal year ended February 1, 2020.

Fiscal years 2022, 2021, 2020 and 2019 all consisted of 52 weeks.

References to our store banners “Shoe Carnival”

and “Shoe Station”

6 unchanged sentences

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.

Shoe Carnival, Inc.

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

References to the “SEC”

refer to the United States Securities and Exchange Commission.

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 2022 operating results.

Shoe Carnival

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

Our Shoe Carnival retail concept has developed over our 44 year history and 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.

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

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

As of our Fiscal 2022 year end, we operated 373 Shoe Carnival stores located across 35 states and Puerto Rico and offered online shopping at www.shoecarnival.com.

On December 3, 2021, we acquired the physical stores and substantially all of the other assets and liabilities 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.

The Shoe Station assets were acquired for approximately $70.4 million, funded with cash on hand.

This acquisition was the first in our history.

As of our Fiscal 2022 year end, we operated 24 stores across five states in the Southeast under the Shoe Station banner, inclusive of the 21 stores acquired and three additional stores opened since the acquisition.

The addition of this banner has created a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics.

Net Sales attributed to the Shoe Station banner were $99.9 million in Fiscal 2022 and $16.6 million from the acquisition date through January 29, 2022 in Fiscal 2021.

The Shoe Station e-commerce website, www.shoestation.com, went live on our e-commerce platform in early February 2023.

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 our banners, Shoe Carnival and Shoe Station, destinations of choice for today’s retail consumer.

Distinctive shopping experience

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.

We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales;

the building of a loyal, repeat customer base;

the creation of word-of-mouth advertising;

and enhanced sell-through of in-season goods.

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

Broad merchandise assortment

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.

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 or through our other omnichannel choices.

Efficient store level cost structure

Our cost-efficient store operations and real estate strategy enable us to price products competitively.

We achieve low labor costs by housing merchandise directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose.

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

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”) 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.

Our data warehouse enables our merchandising and store operations staff to analyze sales, margin and inventory levels by location, by day, down to the size of shoe.

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 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 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.

Growth Strategy

Store portfolio

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 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

Stores open at the beginning of the year

New store openings

Stores acquired

Store closings

Stores open at the end of the year

Stores relocated

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

State/Territory

North Carolina

South Carolina

West Virginia

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.

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.

Our Diversified Sales Mix

We sell broadly across the family footwear channel, with balanced distribution among type of customer (men, women and children), product (athletics and non-athletics) and age (senior citizens to infants) with no singular reliance on any particular segment.

The products we offer are a mix of footwear necessities for sport, work, daily activities and special events.

The table below sets forth our percentage of sales by product category over the last five fiscal years.

Non-Athletics:

Our Strategic Growth Initiatives

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

We are targeting operating at least 500 stores by 2028.

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

In Fiscal 2022, we opened four new stores (one Shoe Carnival store and three Shoe Station stores) within existing markets.

We aim to operate approximately 10 to 20 new stores in Fiscal 2023 with additional store growth acceleration in 2024 and beyond.

This increased scale will be accomplished through a combination of both organic and acquired store growth.

In the near term, our focus is to primarily grow the Shoe Station banner within our existing footprint, and we aim to achieve 100 Shoe Station stores also by 2028.

Store Modernization

As a key component to increasing comparable store sales, in Fiscal 2021 we began a multiyear project to modernize our store fleet.

In Fiscal 2022 and Fiscal 2021 our capital expenditures were $77.3 million and $31.4 million,

respectively, with a primary focus on store modernization and new stores.

Our new store design is viewed as a differentiator by certain strategic vendor partners and has provided us an opportunity to increase access to branded merchandise in the near term.

As of Fiscal 2022 year end, 41% of our fleet modernization program has been completed, representing 164 of the 397 stores in our fleet.

Over 60% of our fleet modernization program is expected to be completed by Fiscal 2023 year end.

The entire program is expected to be completed in the Fiscal 2024 - Fiscal 2025 horizon.

E-commerce Growth

Our e-commerce platform is an extension of our physical stores and is designed to improve our customer’s shopping experience.

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 customers will have new online experiences in Fiscal 2023, as we launched our www.shoestation.com website in February 2023, and we expect to relaunch our www.shoecarnival.com website later in Fiscal 2023.

We have completed the technology migration for both banners to a single platform hosted by a leading provider.

This marks the first major redesign of our Shoe Carnival website since 2016.

We anticipate these enhancements will increase user conversion, enhance the ease of navigation and improve overall functionality compared to the legacy website design.

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

Our goal is for our e-commerce sales channel to provide between 10% and 15% of enterprise-wide merchandise sales, versus a pre-pandemic 6% in Fiscal 2019.

E-commerce sales represented approximately 10% of our merchandise sales in Fiscal 2022, 12% in Fiscal 2021 and 19% in Fiscal 2020 as impacted by changes in customer shopping behavior during the peak of the pandemic.

Customer Relationship Management ("CRM")

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

3 unchanged sentences

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.

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 meet this customer need and demand at a geographic and store level.

Our CRM program allows us to drive customer retention by delivering to 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’

2 unchanged sentences

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 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.

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 and the national name brands we offer.

We are focused on expanding our Shoe Perks enrollment.

In Fiscal 2022, our Shoe Perks membership grew to 32.1 million members, representing an increase in new customers of 34% compared to pre-pandemic Fiscal 2019 year end

and 13% compared to Fiscal 2021 year end.

Our Shoe Perks loyalty program members now include Shoe Station customers, which added over 1.4 million customers in Fiscal 2022.

In Fiscal 2022, purchases from Shoe Perks members were approximately 67% of our comparable Net Sales, which does not include Shoe Station activity in Fiscal 2022.

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.

2 unchanged sentences

The average transaction value for our Gold tier customers was approximately 39% higher than non-Gold tier Shoe Perks members in Fiscal 2022.

E-commerce Platform

Our e-commerce platform is an extension of our physical stores and is designed to improve the customer journey by providing a more relevant and personalized shopping experience.

Our e-commerce platform played a critical role in fiscal 2020 due to the challenges associated with the COVID-19 pandemic.

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

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 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 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.

Vendor Drop-Ship Program

We maintain a vendor drop-ship program with select business partners.

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.

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.

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.

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.

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

This helps us select our assortment and quantities in order to manage and allocate inventories at the store level.

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

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 our retail concepts, in both existing and new markets.

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.

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.

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 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.

We emphasize our value proposition to customers by combining current season name brand products with marketing promotions.

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 sales by product category.

Non-Athletics:

Building Brand Awareness

Strong and Diversified Vendor Partnerships

In Fiscal 2022, a record number of vendors generated over $15 million in merchandise sales for us.

We continued our long-term relationships with both Nike, Inc.

(“Nike”) and Skechers U.S.A., Inc.

(“Skechers”) and further diversified our merchandise offerings among other vendor partners.

Collectively, Nike and Skechers accounted for 27% of our Net Sales in Fiscal 2022, compared to 39% in Fiscal 2021 and 43% in Fiscal 2020.

Nike accounted for approximately 14% of our Net Sales in Fiscal 2022, 28% in Fiscal 2021 and 33% in Fiscal 2020, and Skechers accounted for approximately 13% of our Net Sales in Fiscal 2022, 11% in Fiscal 2021 and 10% in Fiscal 2020.

We continually work to strengthen our brand offerings and our relationships with our key vendors.

While we have no long-term contracts in place with any of our vendors, we anticipate that Nike and Skechers will continue to be high-volume vendors for us in Fiscal 2023.

We also anticipate increased availability of athletic product in Fiscal 2023 as athletic supply chains are expected to return to a more normal cadence.

Stable Gross Profit Margins and Operating Income Margins

We increased our gross profit margin in Fiscal 2021 and generally maintained that margin in Fiscal 2022.

Our promotional model is derived from insights driven by our CRM program and return on investment of our promotional strategies.

We have significantly reduced broad-based promotional activity, such as “buy one-get one half off.”

Our level of promotional intensity decreased by over 17% in Fiscal 2022 compared to our pre-pandemic promotional activity in Fiscal 2019.

Primarily as a result of our change in promotional strategy, our gross profit margin increased to 37.1% in Fiscal 2022 and 39.6% in Fiscal 2021 compared to a pre-pandemic level of 30.1% in Fiscal 2019.

Those higher gross profit margins have generated double digit operating income margins in each of the last two fiscal years, at 11.6% in Fiscal 2022 and 15.6% in Fiscal 2021, compared to a pre-pandemic Fiscal 2019 operating income margin of 5.2% and our pre-pandemic record operating income margin of 5.8%.

Our Competitive Strengths

We believe our financial success is due to a number of key competitive strengths that make our Shoe Carnival and Shoe Station banners destinations of choice for our family channel footwear consumer.

Digital Media to Build Brand Awareness

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.

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

The use of digital media comprises the substantial portion of 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.

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

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

Our facility can support the processing and distribution needs for up to 460 stores based on our current configuration.

We have the right to expand the facility by 200,000 square feet, which would provide us processing capacity to support approximately 650 stores.

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

Centralized Distribution Process

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.

These methods may include count verification, price and bar code labeling of each unit (when not performed by the manufacturer), redistribution of an order into size assortments (when not performed by the manufacturer) and allocation of shipments to individual stores.

methods may include count verification, price and bar code labeling of each unit (when not performed by the manufacturer), redistribution of an order into size assortments (when not performed by the manufacturer) and allocation of shipments to individual stores.

Throughout packing, allocating, storing and shipping, our distribution process is essentially paperless.

1 unchanged sentence

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

We leverage these investments with third party managed software tailored to our specific needs to track merchandise during the transportation and distribution process.

During Fiscal 2022, 92% of merchandise was received into our distribution center, with a much smaller percentage of merchandise being either directly drop shipped to customers or sent directly to a store location.

Additional information about our distribution center can be found in PART I, ITEM 2, "Properties" of this Annual Report on Form 10-K.

Disciplined Approach to Capital Management

We remain focused on funding our normal operations without debt.

We ended Fiscal 2022 with no debt and $63.0 million of Cash and Cash Equivalents and Marketable Securities.

Over the last five fiscal years, we have had no debt outstanding and Cash, Cash Equivalents, and Marketable Securities of at least $61 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.

Leased Stores

Our stores can be easily found in high traffic shopping areas and are generally located in open-air shopping centers.

On average, our Shoe Carnival physical stores are approximately 10,900 square feet and carry inventory of approximately 30,800 pairs of shoes per location.

On average, our Shoe Station physical stores are approximately 17,800 square feet and carry an average inventory of 44,100 pairs of shoes per location.

More information about our store locations and other properties can be found in PART I, ITEM 2, "Properties" of this Annual Report on Form 10-K.

All stores are currently leased and more information on our leases can be found in Note 10 - "Leases" in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Distinctive In-Store Shopping Experience

Our in-store merchandise is displayed directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose.

Our trained 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.

Our new store design incorporates the use of digital screens that are centrally controlled and are more adaptable than printed visual in-store advertising.

These digital screens further enhance the in-store shopping experience and provide another opportunity for our vendors to compete for in-store advertising.

We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales, the building of a loyal, repeat customer base, the creation of word-of-mouth advertising, and enhanced sell-through of in-season goods.

Broad Merchandise Assortment

Our product assortment is comprised primarily of on-trend branded 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.

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

Information Technology

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

The POS provides, in addition to other features, full price management, 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, both store personnel and centralized merchandising staff are able to monitor sales, cost of sales and the success of product promotions in real-time.

Our systems provide up-to-date sales and inventory information.

Our data warehouse enables our merchandising and store operations staff to analyze sales, margin and inventory levels by store.

Using this information, our merchandise managers meet regularly with vendors to compare 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.

Efficient E-commerce Order Management and Fulfillment (Ship-From-Store and Vendor Drop Ship Program)

We recently implemented a third party hosted order management system designed to our specific needs, which has enabled us to meet the complex demands of omnichannel fulfillment and has positioned us for scaling our e-commerce capabilities as we grow.

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

Online orders are primarily fulfilled using physical stores.

By fulfilling e-commerce orders principally from our store level inventory and staff, 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 can also be fulfilled from our distribution center in Evansville, Indiana and the distribution center is used in times of peak demand.

We also maintain a vendor drop-ship program with select business partners.

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.

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.

Competitive Pricing For Our Customers

Our customer is primarily a 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 primarily name brand merchandise at competitive prices, we generate broad customer appeal.

The retail footwear business is highly competitive.

1 unchanged sentence

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

Our specific competitors vary from market to market.

We compete with most department stores and traditional shoe stores by offering competitive prices.

1 unchanged sentence

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

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.

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.

These functions include accounting, strategic sourcing, store maintenance, information systems, marketing, human resources, distribution and pricing.

Management oversight for e-commerce is also located at our corporate headquarters.

Culture and Human Capital Management

1 unchanged sentence

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

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

As non-essential retailers were required to close to the public, many of our competitors decided to furlough a significant number of employees.

We, however, took a different route, finding innovative ways to keep our associates in full employment.

This strategy positively impacted our associates, their families, and the communities we serve.

In addition, this decision enabled us to rapidly reopen our stores in a safe manner as soon as we were permitted to do so.

Workforce Diversity and Inclusion

We serve a diverse customer base and seek diversity in and among our workforce in all areas, from our stores to our distribution center and our corporate office.

We believe that the diversity of our workforce and management is a tremendous asset.

Workforce Diversity

We serve a diverse customer base and seek diversity in and among our workforce in all areas, from our stores to our distribution center and our corporate offices.

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.

2 unchanged sentences

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

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

As of our Fiscal 2022 year end, our workforce identified as 64% female and 36% 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 64% Caucasian and 36% 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.

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 four years from 5% to 27%.

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

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 70% Caucasian and 30% 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 percentage identifying as female has significantly increased over the last five years from 5% to 18% with several departments, such as human resources, merchandising and technology, being led by those that identify as female.

We are also focused on the diversity of our Board.

Currently, two of four (50%) of our non-employee Board members and two of seven of our total Board identify as female.

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.

Over the last three years, three board members have transitioned, creating opportunity 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.

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.

During the height of the pandemic when other retailers furloughed or laid off employees, we took a different route, finding innovative ways to retain and pay our full-time associates.

We believe this decision had a positive impact on our employees and the communities we serve.

This decision also allowed for us to reopen quickly to meet the in-store needs of our customer base and other stakeholders.

Our store-level training programs provide the foundation for long-term careers and our ability to promote from within.

We support the first-time jobs for many of our associates where they gain workforce experiences that may grow into long-term careers.

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.

As of our Fiscal 2022 year end, of our 33 district managers across both banners, 61% have been employed by us for more than 20 years.

The average tenure of the general managers who operate our Shoe Carnival and Shoe Station bannered stores was 14 years as of Fiscal 2022 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 or Shoe Station for an average of 19 years.

1 unchanged sentence

Among the many ways we seek to serve our employees, we offer a complete range of benefits.

These include competitive wages and incentives, including stock appreciation rights for mid-level managers;

These include competitive wages and incentives;

an employee stock purchase plan with a discount off the fair value of our common stock;

5 unchanged sentences

We are uniquely focused on training within our store-level, customer-facing operations.

Employees must obtain necessary certifications in order to be responsible for the keys to a store and eventually to become a general manager.

Employees must obtain necessary

certifications in order to be responsible for the keys to a store and eventually to become a general manager.

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

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;

Non-discrimination and anti-harassment;

Cybersecurity awareness and responsibility;

8 unchanged sentences

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

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

During calendar year 2022, we recorded 71 non COVID-related OSHA recordable incidents, an approximate 7% reduction in incidents compared to five years ago.

Excluding the Shoe Station operations, which continue to be integrated into our safety culture, the decrease compared to five years ago was 20%.

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.

1 unchanged sentence

Number of Employees

At January 29, 2022, we had approximately 5,800 employees, of which approximately 3,200 were employed on a part-time basis.

As of our Fiscal 2022 year end, we had approximately 5,500 employees, of which approximately 3,000 were employed on a part-time basis.

The number of employees fluctuates during the year primarily due to seasonality.

3 unchanged sentences

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 ® , Princess Lacey’s Laces ® , Shoe Station ® , Shoe Station Super Store ® and Shoe Station Select ® .

® , UNR8ED ® , Solanz ® , Shoe Perks ® , SC Work Wear ® , 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.

2 unchanged sentences

We seek to minimize our impact on the environment and reduce our carbon footprint by actively implementing environmentally-friendly processes throughout our business, including energy efficiency initiatives, waste minimization and the use of recycled materials within our supply chain.

Our most significant areas of focus are fuel and packaging material used to deliver merchandise to our distribution center and stores;

Our most significant areas of focus are fuel

and packaging material used to deliver merchandise to our distribution center and stores;

the HVAC and lighting systems in our stores, distribution center and corporate office;

3 unchanged sentences

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.

The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K.

This Annual Report on Form 10-K filed with the Securities and Exchange Commission, including the financial statements and schedules thereto, without the accompanying exhibits, is available without charge to shareholders, investment professionals and securities analysts upon written request.

This Annual Report on Form 10-K filed with the SEC, including the financial statements and schedules thereto, without the accompanying exhibits, is available without charge to shareholders, investment professionals and securities analysts upon written request.

Requests should be directed to Investor Relations at our corporate address.

8 unchanged sentences

Senior Executive Vice President - Chief Merchandising Officer

Executive Vice President - Chief Retail Operations Officer

Executive Vice President - Chief Operating Officer

Vice President, Chief Accounting Officer, Corporate Controller and Secretary

9 unchanged sentences

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 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.

40 unchanged sentences

He is a Certified Public Accountant.

We announced on September 22, 2022 that Mr.

Jackson will be retiring, effective May 2023.

Scibetta has been employed as Senior Executive Vice President –

15 unchanged sentences

Chilton has been employed as Executive Vice President –

Chief Retail Operations Officer since April 2021.

Chief Operating Officer since February 2023.

From April 2021 to February 2023, Mr.

Chilton served as our Executive Vice President –

Chief Retail Operations Officer.

From February 2020 to April 2021, Mr.

20 unchanged sentences

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.

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”

3 unchanged sentences

Operational and Strategic Risks

Adverse impacts on consumer spending may significantly harm our business.

Adverse impacts on consumer spending may significantly harm our business and impact our promotional strategies and intensity.

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

13 unchanged sentences

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.

Consumer confidence remains hypersensitive to a variety of uncertain factors, including inflation, recessionary fears, a pandemic resurgence and military conflicts, among other macroeconomic and political uncertainty and instability.

Any adverse change in these factors could result in a decrease in consumer demand for our merchandise.

Reduced consumer demand could result in reduced traffic in our physical stores and to our e-commerce platform, increased selling and promotional expenses and inventory markdowns, and could cause us to close underperforming stores, which could result in higher than anticipated closing costs.

Reduced demand may result in higher than normal inventory positions across our competitive landscape and may limit the prices we can charge for our merchandise and force us to adjust our promotional intensity.

Any of these factors, including becoming more promotional, could have an adverse effect on our business, results of operations and financial condition.

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

Our operations and the markets in which we operate, procure merchandise and raise capital have experienced, and may continue to experience, disruption and financial market volatility associated with the remaining effects of the COVID-19 pandemic.

Governments took, and may continue to take, unprecedented measures to control the spread of COVID-19 and to provide stimulus as a mitigating measure to deteriorating economic conditions.

Our business and results of operations were impacted by the temporary closure of our physical stores in Fiscal 2020, government stimulus in Fiscal 2021 and impacts of inflation potentially sparked by the government stimulus and supply chain disruptions in Fiscal 2022.

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.

The amount of any future stimulus payments and duration of the impact of such payments is uncertain.

Our sales and profitability have been volatile based on the amount of government stimulus and could be further impacted by stimulus in future periods.

We did not have any stores closed as of our Fiscal 2022 and Fiscal 2021 year ends or for extended periods during Fiscal 2022 or Fiscal 2021 due to the pandemic.

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 duration and spread of COVID-19 and its variants 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, testing and masking 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;

Should the COVID-19 pandemic and/or its related after effects lead to further temporary closures of our physical stores;

financial market volatility;

8 unchanged sentences

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

Failure to successfully manage and execute our marketing and pricing strategies 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.

Effective use of CRM data and successful marketing efforts are necessary for us to reach customers through their desired mode of communication.

Our inability to accurately predict our customers’

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

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.

We rely on imported merchandise to sell in our stores.

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

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.

To date, such disruption has increased our costs and negatively impacted our access to merchandise, particularly athletic footwear.

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.

13 unchanged sentences

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 the expected operating results, growth opportunities and other benefits of the Shoe Station acquisition.

A significant portion of our growth strategy is based on growing the Shoe Station banner.

Our ability to achieve our strategies 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.

The acquired Shoe Station banner 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.

11 unchanged sentences

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.

6 unchanged sentences

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.

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.

2 unchanged sentences

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 sell shoes and related accessories through our websites at www.shoecarnival.com and www.shoestation.com and through 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.

If we are unable to 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:

9 unchanged sentences

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 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 operations.

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.

4 unchanged sentences

inclement weather and/or unseasonable weather patterns;

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

consumer trends, including the impact of higher prices on consumer goods;

fashion trends;

6 unchanged sentences

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.

The unpredictability of our comparable store sales may cause our revenue and results of operations to vary from quarter to quarter and year to year, 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.

4 unchanged sentences

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.

We intend to continue to invest in 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.

In addition, as we create more opportunities to connect with our customers through our omnichannel initiatives and as we grow 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 affected.

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:

12 unchanged sentences

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).

and Skechers U.S.A., Inc.,

collectively accounted for approximately 27% of our Net Sales in Fiscal 2022, 39% of our Net Sales in Fiscal 2021 and 43% in Fiscal 2020 (Nike, Inc.

accounted for approximately 14% of our Net Sales in Fiscal 2022, 28% in Fiscal 2021 and 33% in Fiscal 2020 and Skechers U.S.A., Inc.

accounted for approximately 13% of our Net Sales in Fiscal 2022, 11% in Fiscal 2021 and 10% in Fiscal 2020).

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

17 unchanged sentences

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, 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 other offices 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;

2 unchanged sentences

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’

Disasters occurring at our distribution center, our corporate headquarters and other offices, 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.

2 unchanged sentences

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 rely on our 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.

20 unchanged sentences

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.

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.

53 unchanged sentences

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.

An unfavorable outcome could have an adverse effect 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.

1 unchanged sentence

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

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.

1 unchanged sentence

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.

If we are unable to attract and retain quality sales associates and management, embrace automation, such as robot and self-checkout technology, as necessary, or if market conditions or changes to minimum wage laws result in the need for higher wages paid to employees, our ability to meet our 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.

We may not generate sufficient cash flow from operations or obtain sufficient borrowings under our credit agreement 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.

We utilize our credit agreement 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 agreement to fund operational needs.

If we borrow funds under our credit agreement 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.

1 unchanged sentence

make obtaining other sources of debt more difficult;

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

increase our borrowing costs or limit 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.

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 and non-amortizing tradenames, 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.

1 unchanged sentence

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 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.

5 unchanged sentences

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.

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.

17 unchanged sentences

Wayne Weaver, our Chairman of the Board of Directors, and his spouse together beneficially own approximately 32.0% 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.

Weaver's adult daughter is the sole trustee of several grantor retained annuity trusts and, as a result, beneficially owns approximately 4.5% of our outstanding common stock held by such trusts.

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

1 unchanged sentence

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.

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 three-year terms for its members, supermajority voting provisions, restrictions on the ability of shareholders to call a special meeting of shareholders and advance notice 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.

4 unchanged sentences

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