3 unchanged sentences
(In thousands, except share data)
−Removed: July 29, 2023
+Added: October 28, 2023
January 28, 2023
−Removed: July 30, 2022
+Added: October 29, 2022
Current Assets:
31 unchanged sentences
(In thousands, except per share data)
−Removed: July 29, 2023
−Removed: July 30, 2022
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: October 28, 2023
+Added: October 29, 2022
+Added: October 28, 2023
+Added: October 29, 2022
Cost of sales (including buying, distribution
13 unchanged sentences
(In thousands, except per share data)
−Removed: Balance at April 29, 2023
+Added: Balance at July 29, 2023
Dividends declared ($ 0.12 per share)
Employee stock purchase plan purchases
−Removed: Stock-based compensation awards
+Added: Purchase of common stock for treasury
Stock-based compensation expense
+Added: Balance at October 28, 2023
Balance at July 30, 2022
−Removed: Balance at April 30, 2022
Dividends declared ($ 0.09 per share)
3 unchanged sentences
on stock-based compensation awards
+Added: Purchase of common stock for treasury
Stock-based compensation expense
−Removed: Balance at July 30, 2022
−Removed: Twenty-six Weeks Ended
+Added: Balance at October 29, 2022
+Added: Thirty-nine Weeks Ended
(In thousands, except per share data)
5 unchanged sentences
on stock-based compensation awards
+Added: Purchase of common stock for treasury
Stock-based compensation expense
−Removed: Balance at July 29, 2023
+Added: Balance at October 28, 2023
Balance at January 29, 2022
6 unchanged sentences
Stock-based compensation expense
−Removed: Balance at July 30, 2022
+Added: Balance at October 29, 2022
See notes to Condensed Consolidated Financial Statements.
2 unchanged sentences
(In thousands)
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: October 28, 2023
+Added: October 29, 2022
Cash Flows From Operating Activities
3 unchanged sentences
Stock-based compensation
−Removed: Loss on retirement and impairment of assets, net
+Added: Loss (Gain) on retirement and impairment of assets, net
Deferred income taxes
17 unchanged sentences
Net cash used in financing activities
−Removed: Net decrease in cash and cash equivalents
+Added: Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
31 unchanged sentences
Thirteen Weeks Ended
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: October 28, 2023
+Added: October 29, 2022
(In thousands, except per share data)
6 unchanged sentences
shares and diluted net income per share
−Removed: Twenty-six Weeks Ended
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: Thirty-nine Weeks Ended
+Added: October 28, 2023
+Added: October 29, 2022
(In thousands, except per share data)
8 unchanged sentences
The computation of Diluted Net Income per Share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units.
−Removed: The computation of Diluted Net Income per Share for the thirteen and twenty-six weeks ended July 29, 2023 excluded approximately 134,000 and 1,000 , respectively, of unvested stock-based awards that will be settled in shares because the impact would have been anti-dilutive.
−Removed: During the thirteen and twenty-six weeks ended July 30, 2022 , approximately 318,000 and 31,000 , respectively, of unvested stock-based awards that will be settled in shares were excluded from the computation of Diluted Net Income per Share because the impact would have been anti-dilutive.
+Added: No unvested stock-based awards that will be settled in shares were excluded from the computation of Diluted Net Income per Share for the thirteen and thirty-nine weeks ended October 28, 2023.
+Added: During the thirteen and thirty-nine weeks ended October 29, 2022 , approximately 290,000 and 253,000 , respectively, of unvested stock-based awards that will be settled in shares were excluded from the computation of Diluted Net Income per Share because the impact would have been anti-dilutive.
Note 3 - Fair Value Measurements
−Removed: The following table presents financial instruments that are measured at fair value on a recurring basis at July 29, 2023, January 28, 2023 and July 30, 2022:
+Added: The following table presents financial instruments that are measured at fair value on a recurring basis at October 28, 2023, January 28, 2023 and October 29, 2022:
Fair Value Measurements
(In thousands)
−Removed: As of July 29, 2023
+Added: As of October 28, 2023
Cash equivalents - money market mutual funds
5 unchanged sentences
deferred compensation
−Removed: As of July 30, 2022
+Added: As of October 29, 2022
Cash equivalents - money market mutual funds
1 unchanged sentence
deferred compensation
−Removed: W e invest in publicly traded mutual funds with readily determinable fair values.
+Added: We invest in publicly traded mutual funds with readily determinable fair values.
These Marketable Securities are designed to mitigate volatility in our Condensed Consolidated Statements of Income associated with our non-qualified deferred compensation plan.
−Removed: As of July 29, 2023, these Marketable Securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan.
−Removed: As of July 29, 2023, the balance in our deferred compensation plan was $ 12.2 million, of which $ 1.6 million was in Accrued and Other Liabilities based on scheduled payments due within the next 12 months and the remaining balance was in Deferred Compensation, a long-term liability.
−Removed: To the extent there is a variation in invested funds compared to the total non-qualifi ed deferred compensation plan liability, such fund variance is invested in a stable value mutual fund.
+Added: As of October 28, 2023, these Marketable Securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan.
+Added: As of October 28, 2023, the balance in our deferred compensation plan was $ 11.4 million, of which $ 1.6 million was in Accrued and Other Liabilities based on scheduled payments due within the next 12 months and the remaining balance was in Deferred Compensation, a long-term liability.
+Added: To the extent there is a variation in invested funds compared to the total non-qualifi ed deferred compensation plan liability, such fund variance is managed through a stable value mutual fund.
We classify these Marketable Securities as current assets because we have the ability to convert the securities into cash at our discretion and these Marketable Securities are not held in a rabbi trust.
−Removed: We have recognized cumulative unrealized losses of $ 1.8 million, $ 2.9 million and $ 2.5 million related to equity securities still held at July 29, 2023, January 28, 2023 and July 30, 2022, respectively.
−Removed: For the thirteen and twenty-six weeks ended July 29, 2023, we have recognized unrealized gains of $ 761,000 and $ 1.1 million, respectively, related to equity securities still held at July 29, 2023.
−Removed: For the thirteen and twenty-six weeks ended July 30, 2022, we have recognized unrealized gains of $ 34,000 and unrealized losses of $ 501,000 , respectively, related to equity securities still held at July 30, 2022.
+Added: We have recognized cumulative unrealized losses of $ 2.7 million, $ 2.9 million and $ 3.2 million related to equity securities still held at October 28, 2023, January 28, 2023 and October 29, 2022, respectively.
+Added: For the thirteen and thirty-nine weeks ended October 28, 2023, we have recognized unrealized losses of $ 919,000 and unrealized gains of $ 141,000 , respectively, related to equity securities still held at October 28, 2023.
+Added: For the thirteen and thirty-nine weeks ended October 29, 2022, we have recognized unrealized losses of $ 647,000 and $ 1.1 million, respectively, related to equity securities still held at October 29, 2022.
The fair values of Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued and Other Liabilities approximate their carrying values because of their short-term nature.
5 unchanged sentences
Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in Selling, General and Administrative Expenses.
−Removed: If the Operating Lease Right-of-Use Asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease term.
−Removed: No impairment charges were recorded during the thirteen and twenty-six weeks ended July 29, 2023 or the thirteen and twenty-six weeks ended July 30, 2022.
+Added: If the Operating Lease Right-of-Use Asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over
+Added: the remaining lease term.
+Added: No impairment charges were recorded during the thirteen and thirty-nine weeks ended October 28, 2023 or the thirteen and thirty-nine weeks ended October 29, 2022.
Note 4 - Stock-Based Compensation
3 unchanged sentences
Among other changes approved by our shareholders, the Amended 2017 Plan increased the number of shares of our common stock that are available for issuance under the plan by 1.8 million additional shares.
−Removed: As of July 29, 2023, 1,858,000 shares were available for issuance under the Amended 2017 Plan, assuming that all unmeasured but outstanding performance stock units vest at the maximum level of performance.
+Added: As of October 28, 2023, 1,905,372 shares were available for issuance under the Amended 2017 Plan, assuming that all unmeasured but outstanding performance stock units vest at the maximum level of performance.
Stock-based compensation includes share-settled awards issued pursuant to the Amended 2017 Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards.
Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights.
−Removed: For the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022, stock-based compensation expense was comprised of the following:
+Added: For the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022, stock-based compensation expense was comprised of the following:
(In thousands)
−Removed: July 29, 2023
−Removed: July 30, 2022
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: October 28, 2023
+Added: October 29, 2022
+Added: October 28, 2023
+Added: October 29, 2022
Share-settled equity awards
4 unchanged sentences
Additional income tax benefit on vesting of share-settled awards
−Removed: As of July 29, 2023 , approximately $ 8.4 million of unrecognized compensation expense remained related to our share-settled equity awards.
+Added: As of October 28, 2023 , approximately $ 6.4 million of unrecognized compensation expense remained related to our share-settled equity awards.
The cost is expected to be recognized over a weighted average period of approximately 1.7 years.
4 unchanged sentences
Outstanding at January 28, 2023
−Removed: Outstanding at July 29, 2023
−Removed: The total fair value at grant date of restricted stock units and performance stock units that vested during the twenty-six weeks ended July 29, 2023 and July 30, 2022 was $ 4.8 million and $ 3.2 million, respectively.
−Removed: The weighted-average grant date fair value of restricted stock units and performance stock units granted during the twenty-six weeks ended July 30, 2022 was $ 30.32 .
+Added: Outstanding at October 28, 2023
+Added: The total fair value at grant date of restricted stock units and performance stock units that vested during the thirty-nine weeks ended October 28, 2023 and October 29, 2022 was $ 4.8 million and $ 3.3 million, respectively.
+Added: The weighted-average grant date fair value of restricted stock units and performance stock units granted during the thirty-nine weeks ended October 29, 2022 was $ 30.32 .
The following table summarizes transactions for our restricted stock and other stock awards:
2 unchanged sentences
Outstanding at January 28, 2023
−Removed: Outstanding at July 29, 2023
−Removed: No restricted stock and other stock awards vested during the twenty-six weeks ended July 29, 2023 or July 30, 2022.
−Removed: The weighted-average grant date fair value of restricted stock and other stock awards granted during the twenty-six weeks ended July 30, 2022 was $ 24.12 .
+Added: Outstanding at October 28, 2023
+Added: No restricted stock and other stock awards vested during the thirty-nine weeks ended October 28, 2023 or October 29, 2022.
+Added: The weighted-average grant date fair value of restricted stock and other stock awards granted during the thirty-nine weeks ended October 29, 2022 was $ 24.12 .
Note 5 –
1 unchanged sentence
Revenue is disaggregated by product category below.
−Removed: Net Sales and percentage of Net Sales for the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022 were as follows:
+Added: Net Sales and percentage of Net Sales for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022 were as follows:
(In thousands)
Thirteen Weeks
−Removed: Ended July 29, 2023
+Added: Ended October 28, 2023
Thirteen Weeks
−Removed: Ended July 30, 2022
+Added: Ended October 29, 2022
Non-Athletics:
4 unchanged sentences
(In thousands)
−Removed: Twenty-six Weeks
−Removed: Ended July 29, 2023
−Removed: Twenty-six Weeks
−Removed: Ended July 30, 2022
+Added: Thirty-nine Weeks
+Added: Ended October 28, 2023
+Added: Thirty-nine Weeks
+Added: Ended October 29, 2022
Non-Athletics:
31 unchanged sentences
We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer).
−Removed: Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at July 29, 2023, January 28, 2023 or July 30, 2022.
+Added: Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at October 28, 2023, January 28, 2023 or October 29, 2022.
Returns and Refunds
2 unchanged sentences
The estimated cost of Merchandise Inventory is recorded as a reduction to Cost of Sales and an increase in Merchandise Inventories.
−Removed: Approximately $ 866,000 of refund liabilities and $ 503,000 o f right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, as of July 29, 2023 and January 28, 2023.
−Removed: Approximately $ 884,000 of refund liabilities and $ 516,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, at July 30, 2022.
+Added: Approximately $ 866,000 of refund liabilities and $ 503,000 o f right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, as of October 28, 2023 and January 28, 2023.
+Added: Approximately $ 884,000 of refund liabilities and $ 516,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, at October 29, 2022.
Contract Liabilities
2 unchanged sentences
We do not record breakage revenue when escheat liability to relevant jurisdictions exists.
−Removed: At July 29, 2023, January 28, 2023 and July 30, 2022, approxima tely $ 2.0 million, $ 2.4 million and $ 2.0 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and Other Liabilities, respectively.
+Added: At October 28, 2023, January 28, 2023 and October 29, 2022, approxima tely $ 1.8 million, $ 2.4 million and $ 1.8 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and Other Liabilities, respectively.
We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two years.
6 unchanged sentences
We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates.
−Removed: During the thirteen and twenty-six weeks ended July 29, 2023 , approximately $ 1.4 million and $ 2.7 million, respectively, of loyalty rewards were recognized in Net Sales.
−Removed: During the thirteen and twenty-six weeks ended July 30, 2022 , approximately $ 1.3 million and $ 2.6 million, respectively, of loyalty rewards were recognized in Net Sales.
−Removed: At July 29, 2023, January 28, 2023 and July 30, 2022, approxi mately $ 950,000 , $ 844,000 and $ 889,000 , respectively, of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities.
+Added: During the thirteen and thirty-nine weeks ended October 28, 2023 , approximately $ 1.6 million and $ 4.3 million, respectively, of loyalty rewards were recognized in Net Sales.
+Added: During the thirteen and thirty-nine weeks ended October 29, 2022 , approximately $ 1.5 million and $ 4.1 million, respectively, of loyalty rewards were recognized in Net Sales.
+Added: At October 28, 2023, January 28, 2023 and October 29, 2022, approxi mately $ 956,000 , $ 844,000 and $ 949,000 , respectively, of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities.
We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.
3 unchanged sentences
All of our leases are operating leases.
−Removed: Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of July 29, 2023.
−Removed: Lease costs, including related common area maintenance (“CAM”), property taxes and insurance, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and twenty-six weeks ended July 29, 2023 and July 30, 2022:
+Added: Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of October 28, 2023.
+Added: Lease costs, including other related occupancy costs, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022:
(In thousands)
−Removed: July 29, 2023
−Removed: July 30, 2022
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: October 28, 2023
+Added: October 29, 2022
+Added: October 28, 2023
+Added: October 29, 2022
Operating lease cost
Variable lease cost
−Removed: CAM, property taxes and insurance
+Added: Occupancy costs
Percentage rent and other variable lease costs
40 unchanged sentences
We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 as filed with the SEC.
−Removed: This section of this Quarterly Report on Form 10-Q generally discusses our results for second quarter 2023 and second quarter 2022 and year-over-year comparisons between second quarter 2023 and second quarter 2022, as well as year-to-date results for, and comparisons between, the two periods.
−Removed: Referred to herein, second quarter 2023 is the thirteen weeks ended July 29, 2023 and second quarter 2022 is the thirteen weeks ended July 30, 2022.
−Removed: Also referred to herein, year-to-date 2023 is the twenty-six weeks ended July 29, 2023 and year-to-date 2022 is the twenty-six weeks ended July 30, 2022.
+Added: This section of this Quarterly Report on Form 10-Q generally discusses our results for third quarter 2023 and third quarter 2022 and year-over-year comparisons between third quarter 2023 and third quarter 2022, as well as year-to-date results for, and comparisons between, the two periods.
+Added: Referred to herein, third quarter 2023 is the thirteen weeks ended October 28, 2023 and third quarter 2022 is the thirteen weeks ended October 29, 2022.
+Added: Also referred to herein, year-to-date 2023 is the thirty-nine weeks ended October 28, 2023 and year-to-date 2022 is the thirty-nine weeks ended October 29, 2022.
Overview of Our Business
36 unchanged sentences
July 29, 2023
+Added: October 28, 2023
April 30, 2022
July 30, 2022
+Added: October 29, 2022
(1) Comparable store sales is a key performance indicator for us.
5 unchanged sentences
E-commerce platforms associated with a physical store acquisition will not be included in comparable store sales until the initial physical stores are included.
−Removed: The 21 original Shoe Station stores acquired and the www.shoestation.com e-commerce site that went live in early February 2023 are included in comparable store sales calculations beginning in first quarter 2023.
+Added: The 21 original Shoe Station stores acquired and the shoestation.com e-commerce site that went live in early February 2023 are included in comparable store sales calculations beginning in first quarter 2023.
The following table sets forth our results of operations expressed as a percentage of Net Sales for the periods indicated:
−Removed: July 29, 2023
−Removed: July 30, 2022
−Removed: July 29, 2023
−Removed: July 30, 2022
+Added: October 28, 2023
+Added: October 29, 2022
+Added: October 28, 2023
+Added: October 29, 2022
Cost of sales (including buying, distribution and
4 unchanged sentences
Income tax expense
−Removed: Executive Summary for Second Quarter Ended July 29, 2023
−Removed: For second quarter 2023, Diluted Net Income per Share (“EPS”) was $0.71, compared to $1.04 of EPS in second quarter 2022.
−Removed: The primary driver of the lower EPS in second quarter 2023 compared to second quarter 2022 was a $17.7 million, or 5.7%, decline in Net Sales.
−Removed: The Net Sales decline was primarily due to store traffic declining approximately 7%, which resulted in a comparable store sales decline of 6.5% compared to second quarter 2022.
−Removed: A 5.4% increase in our e-commerce Net Sales and Net Sales from new Shoe Station stores partially offset the decrease.
−Removed: As a result of e-commerce growth and new stores, we grew Net Sales under our Shoe Station banner by low-single digits.
−Removed: Net Sales under the Shoe Carnival banner declined mid-single digits primarily due to a store traffic decline principally from our lower income consumers and within our urban markets.
−Removed: Second quarter 2023 ranked as the third best second quarter in our history in terms of EPS, only surpassed by the second quarters of fiscal 2022 and fiscal 2021.
−Removed: Our investments in customer relationship management (“CRM”) systems and store modernization have continued to produce sustained higher gross profit margin, increased customer conversion and increased loyalty members compared to our pre-CRM and pre-modernization results in 2019.
−Removed: The benefits of our CRM and store modernization programs were key factors to maintaining the following results with store traffic continuing to be impacted by inflation and higher interest rates:
−Removed: Second quarter 2023 marked the tenth consecutive quarter that gross profit margin exceeded 35%;
−Removed: Loyalty customers grew over 12% compared to second quarter 2022 to 33.3 million customers;
+Added: Executive Summary for Third Quarter Ended October 28, 2023
+Added: For third quarter 2023, Diluted Net Income per Share (“EPS”) was $0.80, compared to $1.18 of EPS in third quarter 2022.
+Added: The primary driver of the lower EPS in third quarter 2023 compared to third quarter 2022 was a $21.7 million, or 6.4%, decline in Net Sales.
+Added: The Net Sales decline was primarily due to physical store traffic declining approximately 11%, which resulted in a comparable store sales decline of 7.4% for the quarter.
+Added: In August, our comparable store sales decline improved compared to the comparable store sales declines experienced earlier in fiscal 2023, driven by growth in children’s athletics during our back-to-school season.
+Added: However, in September and October, comparable Net Sales declines accelerated to high-single digits due to softness in our seasonal and fall merchandise sales, including boots.
+Added: We believe these declines were primarily due to unseasonable hot, dry weather and the impact of persistent inflation and higher interest rates, particularly on our lower income customers and more urban markets.
+Added: A 9.3% year-over-year increase in our e-commerce Net Sales and Net Sales from new Shoe Station stores partially offset the decrease in Net Sales for the quarter.
+Added: As a result of e-commerce growth and new stores, we grew Net Sales under our Shoe Station banner low-double digits versus third quarter 2022 and operating income margin for the banner was accretive to our overall operating income margin for the quarter.
+Added: Net Sales under the Shoe Carnival banner declined mid-single digits primarily due to the lower September and October Net Sales described above.
+Added: Third quarter 2023 ranked as the third best third quarter in our history in terms of EPS and Net Sales, only surpassed by the third quarters of fiscal 2022 and fiscal 2021.
+Added: Compared to a longer-term horizon, our third quarter 2023 EPS of $0.80 was more than any full year EPS prior to 2018.
+Added: Our investments in customer relationship management (“CRM”) systems, store modernization and e-commerce capability have continued to produce sustained higher gross profit margin, increased customer conversion and increased loyalty members compared to our pre-CRM and pre-modernization results in 2019.
+Added: The benefits of our CRM and store and e-commerce modernization programs were key factors to maintaining the following results with store traffic impacted by weather, inflation, higher interest rates and macro-economic uncertainty:
+Added: While gross profit margin in third quarter 2023 was lower compared to third quarter 2022, third quarter 2023 marked the 11th consecutive quarter that gross profit margin exceeded 35%;
+Added: Total loyalty customers grew nearly 8% compared to third quarter 2022 and Shoe Station loyalty members grew 18%;
Store conversion was over 400 basis points higher compared to pre-CRM and pre-modernization results in 2019.
−Removed: In second quarter 2023, we increased our strategic investments in branding, advertising and our in-store experience.
−Removed: These investments resulted in increased Selling, General and Administrative Expenses and occupancy costs in Cost of Sales in second quarter 2023 compared to second quarter 2022.
−Removed: Significant progress was made in the first half of 2023 to reduce our Merchandise Inventories and optimize our inventory positions for an improved athletic assortment of national named brands.
−Removed: Second quarter 2023 ending inventory was $23.8 million higher than the prior year, compared to first quarter 2023 when ending inventory was $44.5 million higher than the prior year and to fiscal 2022 year end when inventory was $105.2 million higher than the prior year end.
−Removed: We expect our Merchandise Inventories at the end of third quarter 2023 to be lower than the end of third quarter 2022 and to be approximately $40 million lower by year end 2023 compared to year end 2022.
−Removed: Year end fiscal 2022 marked the 18th consecutive year we ended the year with no debt, and through second quarter 2023 we also funded our operations without debt.
−Removed: As of July 29, 2023, we had $46.8 million of Cash, Cash Equivalents and Marketable Securities and $99.3 million in borrowing capacity.
−Removed: We ended second quarter 2023 with 399 total stores, 373 Shoe Carnival stores and 26 Shoe Station stores.
−Removed: In second quarter 2023, we opened one Shoe Carnival store and one Shoe Station store.
−Removed: No stores were closed in second quarter 2023.
−Removed: In August 2023, we opened another new store, achieving the 400 store level for the first time since 2018.
−Removed: Over 50% of Shoe Carnival stores have been modernized.
−Removed: Results of Operations for Second Quarter Ended July 29, 2023 Compared to Second Quarter Ended July 30, 2022
−Removed: Net Sales were $294.6 million during second quarter 2023 and decreased 5.7% compared to second quarter 2022.
−Removed: The decrease was due to a 6.5% comparable store sales decline resulting from an approximate 7% decrease in physical store traffic, which we believe was primarily due to persistent inflation and higher interest rates impacting our lower income consumers and our urban markets, partially offset by a 5.4% increase in e-commerce Net Sales and Net Sales from new Shoe Station stores.
+Added: Similar to second quarter 2023, in third quarter 2023 we invested aggressively in advertising and marketing campaigns to support back-to-school shopping and new fall merchandise.
+Added: This advertising investment was the primary driver to increased Selling, General and Administrative Expenses (“SG&A”) compared to third quarter 2022.
+Added: Operating more total stores and more modernized stores also increased SG&A and occupancy costs in Cost of Sales in third quarter 2023 compared to third quarter 2022.
+Added: Buying, distribution and occupancy costs (“BDO”) in Cost of Sales were lower in third quarter 2023 compared to third quarter 2022, as distribution costs have moderated from the supply chain issues experienced in 2022 and 2021, which more than offset the increase in occupancy costs.
+Added: Significant progress has been made throughout fiscal 2023 to reduce our Merchandise Inventories and optimize our inventory positions for an improved athletic assortment of national named brands.
+Added: We continued reducing and optimizing inventory in third quarter 2023 to drive operational efficiencies and cash flow benefits.
+Added: Third quarter 2023 ending inventory was $23.9 million, or 6%, lower than the prior year, compared to fiscal 2022 year end when inventory was $105.2 million higher than the prior year end.
+Added: We expect our Merchandise Inventories to be approximately $40 million, or 10%, lower by year end 2023 compared to year end 2022.
+Added: Year end fiscal 2022 marked the 18th consecutive year we ended the year with no debt, and through third quarter 2023 we also funded our operations without debt.
+Added: As of October 28, 2023, we had $71.1 million of Cash, Cash Equivalents and Marketable Securities and $99.3 million in borrowing capacity.
+Added: During third quarter 2023, we increased our quarterly cash dividend by 20%, from $0.10 per share to $0.12 per share.
+Added: Since third quarter 2020, our quarterly cash dividend per share has increased 166%.
+Added: We also repurchased 230,696 shares in the quarter at a total repurchase price of $5.4 million.
+Added: We ended third quarter 2023 with 401 total stores, 373 Shoe Carnival stores and 28 Shoe Station stores.
+Added: In third quarter 2023, we opened two Shoe Station stores.
+Added: No stores were closed in third quarter 2023.
+Added: Approximately 55% of our total stores have been modernized.
+Added: As an extension of our store modernization program, the Company modernized and relaunched its shoecarnival.com website in late October 2023 and earlier in the year launched the shoestation.com website.
+Added: Combined with advanced CRM capabilities, these investments enhance our customers' omnichannel interaction with us and support our ability to drive long-term, sustainable growth.
+Added: The relaunched shoecarnival.com website incorporates improvements in search capability, use of predictive analytics and improved product imagery and speed of operation.
+Added: Results of Operations for Third Quarter Ended October 28, 2023 Compared to Third Quarter Ended October 29, 2022
+Added: Net Sales were $319.9 million during third quarter 2023 and decreased 6.4% compared to third quarter 2022.
+Added: The decrease was due to a 7.4% comparable store sales decline resulting from an approximate 11% decrease in physical store traffic.
+Added: We believe this lower traffic was primarily due to unseasonable hot, dry weather and the impact of persistent inflation and higher interest rates, particularly on our lower income customers and more urban markets.
+Added: The decrease in Net Sales was partially offset by a 9.3% increase in e-commerce Net Sales and Net Sales from new Shoe Station stores.
+Added: August comparable Net Sales declined mid-single digits during the back-to-school season, with substantially all merchandise categories declining, partially offset by growth in children's athletics.
+Added: September and October comparable Net Sales slowed to a high-single digit decline due to softness in seasonal and fall merchandise sales, including boot sales.
E-commerce sales were favorably impacted by the February 2023 launch of shoestation.com and increased sales through shoecarnival.com.
−Removed: E-commerce sales were approximately 9% of merchandise sales in both second quarter 2023 and second quarter 2022.
−Removed: With an improved brand name assortment this year, sales of athletic merchandise in second quarter 2023 were flat compared to second quarter 2022 despite lower store traffic.
−Removed: Gross Profit was $105.5 million during second quarter 2023, a decrease of $7.7 million compared to second quarter 2022.
−Removed: Gross profit margin in second quarter 2023 was 35.8% compared to 36.2% in second quarter 2022.
−Removed: Merchandise margin decreased 20 basis points.
−Removed: Buying, distribution and occupancy (“BDO") costs were lower in the quarter compared to second quarter 2022;
−Removed: however, BDO costs decreased gross profit margin by 20 basis points due to the lower Net Sales in second quarter 2023.
−Removed: The BDO costs were lower in second quarter 2023 as freight and distribution costs declined versus 2022 through active management, contract renegotiation and normalization, partially offset by our investments in store modernization and by rent associated with operating more stores.
−Removed: Selling, General and Administrative Expenses (“SG&A”)
−Removed: SG&A increased $6.5 million in second quarter 2023 to $80.8 million compared to $74.3 million in second quarter 2022.
−Removed: Approximately $6.2 million of the increase was evenly split between (1) advertising and brand initiatives, supporting new store growth and e-commerce growth and (2) sustaining our in-store experience, which included higher payroll expense and depreciation of newly modernized stores.
−Removed: As a percentage of Net Sales, SG&A were 27.4% in second quarter 2023, consistent with first quarter 2023 when SG&A was 27.6% of Net Sales.
−Removed: In second quarter 2022, SG&A was 23.8% of Net Sales.
−Removed: The effective income tax rate for second quarter 2023 was 22.3% compared to 25.6% for second quarter 2022.
+Added: E-commerce sales were approximately 10% of merchandise sales in third quarter 2023, compared to 9% in third quarter 2022.
+Added: Gross Profit was $117.7 million during third quarter 2023, a decrease of $13.1 million compared to third quarter 2022.
+Added: Gross profit margin in third quarter 2023 was 36.8% compared to 38.3% in third quarter 2022.
+Added: Merchandise margin decreased 120 basis points primarily due to increased promotions on seasonal and fall merchandise in September and October.
+Added: Buying, distribution and occupancy (“BDO") costs were lower in the quarter compared to third quarter 2022;
+Added: however, BDO costs decreased gross profit margin by 30 basis points due to the lower Net Sales in third quarter 2023.
+Added: The BDO costs were lower in third quarter 2023 as freight and distribution costs declined versus third quarter 2022 through active management, contract renegotiation and normalization, partially offset by our investments in store modernization and by rent associated with operating more stores.
+Added: Selling, General and Administrative Expenses
+Added: SG&A increased $2.5 million in third quarter 2023 to $89.8 million compared to $87.3 million in third quarter 2022.
+Added: The increase was primarily due to an increase in advertising investment during the back-to-school shopping season.
+Added: As a percentage of Net Sales, SG&A were 28.1% in third quarter 2023 compared to 25.5% in third quarter 2022.
+Added: The effective income tax rate for third quarter 2023 was 23.8% compared to 25.6% for third quarter 2022.
Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events.
−Removed: The lower effective tax rate in second quarter 2023 compared to the prior year quarter was reflective of discrete adjustments recognized during the second quarter 2023.
+Added: The lower effective tax rate in third quarter 2023 compared to the prior year quarter was reflective of discrete adjustments recognized during the third quarter 2023.
For the full 2023 fiscal year, we expect our tax rate to be between 23% and 24% compared to the 25.2% effective tax rate recognized during the full 2022 fiscal year.
−Removed: Results of Operations Year-to-Date Through July 29, 2023 Compared to Year-to-Date Through July 30, 2022
+Added: Results of Operations Year-to-Date Through October 28, 2023 Compared to Year-to-Date Through October 29, 2022
Net Sales were $895.7 million in year-to-date 2023 and decreased 7.8% compared to year-to-date 2022.
−Removed: The decrease was due to a 9.3% comparable store sales decline resulting from an approximate 8% decrease in traffic in our physical stores and lower Net Sales through our e-commerce sales channel.
−Removed: We believe the lower store traffic was primarily due to persistent inflation, higher interest rates and a reduction in first quarter 2023 federal tax refunds compared to 2022 impacting our lower income consumers and our urban markets.
−Removed: The decrease was partially offset by Net Sales attributable to new stores, mostly new Shoe Station stores.
−Removed: E-commerce sales were approximately 8% of merchandise sales in year-to-date 2023 compared to 10% in year-to-date 2022.
+Added: The decrease was due to an 8.6% comparable store sales decline resulting from an approximate 9% decrease in traffic in our physical stores, with the most significant decreases in physical stores that serve a lower income demographic and more urban market.
+Added: Net Sales through our e-commerce sales channel were also lower.
+Added: We believe the lower store traffic was primarily due to unseasonable weather in third quarter 2023, persistent inflation, higher interest rates and a reduction in first quarter 2023 federal tax refunds compared to 2022.
+Added: The decrease was partially
+Added: offset by Net Sales attributable to new stores, mostly new Shoe Station stores.
+Added: E-commerce sales were approximately 9% of merchandise sales in both year-to-date 2023 and year-to-date 2022.
Gross Profit was $321.7 million during year-to-date 2023, a decrease of $35.2 million compared to year-to-date 2022.
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SG&A increased $9.0 million, or 3.8%, in year-to-date 2023 to $248.1 million compared to $239.1 million in year-to-date 2022.
−Removed: The increase was nearly evenly split between (1) brand initiatives, supporting new store growth and the launch of shoestation.com and (2) sustaining our in-store experience, which included higher payroll expense and depreciation of newly modernized stores.
−Removed: These increases were partially offset by lower advertising expense.
+Added: The increase was primarily attributable to increased advertising expense and new and modernized store costs.
As a percentage of Net Sales, SG&A were 27.7% in year-to-date 2023 compared to 24.6% in year-to-date 2022.
Interest Income and Interest Expense
−Removed: Changes in our interest income and expense increased our income before taxes by $764,000 in year-to-date 2023 compared to year-to-date 2022.
+Added: Changes in our interest income and expense increased our income before taxes by $1.2 million in year-to-date 2023 compared to year-to-date 2022.
This increase was primarily due to higher interest earned on invested cash balances and lower unused commitment fees under our current credit agreement as compared to our prior credit agreement.
The effective income tax rate for year-to-date 2023 was 23.0% compared to 25.1% for year-to-date 2022.
−Removed: The lower effective tax rate in year-to-date 2023 compared to the prior year-to-date was reflective of discrete adjustments recognized during second quarter 2023.
+Added: The lower effective tax rate in year-to-date 2023 compared to the prior year-to-date was reflective of discrete adjustments recognized during year-to-date 2023.
Liquidity and Capital Resources
−Removed: Our primary sources of liquidity are $46.8 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of the second quarter 2023, cash generated from operations and availability under our $100 million credit agreement.
+Added: Our primary sources of liquidity are $71.1 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of the third quarter 2023, cash generated from operations and availability under our $100 million credit agreement.
We believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months.
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Net cash generated from operating activities was $69.4 million in year-to-date 2023 compared to $18.9 million during year-to-date 2022.
−Removed: The change in operating cash flow was primarily driven by inventory reductions, partially offset by decreased Net Sales in year-to-date 2023.
−Removed: Working capital increased on a year-over-year basis and totaled $330.6 million at July 29, 2023 compared to $287.7 million at July 30, 2022.
−Removed: The increase was primarily attributable to lower Accounts Payable and higher Merchandise Inventories levels, partially offset by lower cash balances due to investment in Property and Equipment related to our store modernization program.
−Removed: Our current ratio was 3.1 as of July 29, 2023 compared to 2.5 as of July 30, 2022.
+Added: The change in operating cash flow was primarily driven by reduced inventory purchases, partially offset by decreased Net Sales in year-to-date 2023.
+Added: Working capital increased on a year-over-year basis and totaled $340.6 million at October 28, 2023 compared to $300.7 million at October 29, 2022.
+Added: The increase was primarily attributable to lower Accounts Payable and higher cash balances, partially offset by lower Merchandise Inventories levels.
+Added: Our current ratio was 3.8 as of October 28, 2023 compared to 2.8 as of October 29, 2022.
Cash Flow –
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We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our nonqualified deferred compensation plan.
−Removed: The balance of these Marketable Securities was $12.2 million at July 29, 2023, compared to $11.6 million at January 28, 2023 and $11.0 million at July 30, 2022.
+Added: The balance of these Marketable Securities was $11.2 million at October 28, 2023, compared to $11.6 million at January 28, 2023 and $10.4 million at October 29, 2022.
Additional information can be found in Note 3 —
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During year-to-date 2023, net cash used in financing activities was $17.2 million compared to $40.0 million during year-to-date 2022.
−Removed: The decrease in net cash used in financing activities was primarily due to the repurchase of $20.5 million of shares in year-to-date 2022 under our Board of Directors’
+Added: The decrease in net cash used in financing activities was primarily due to the repurchase of $5.4 million shares in year-to-date 2023, compared to the repurchase of $30.5 million of shares in year-to-date 2022 under our Board of Directors’
authorized share repurchase program.
−Removed: No share repurchases were made in year-to-date 2023.
Capital Expenditures
4 unchanged sentences
Store Portfolio
−Removed: We opened two Shoe Station branded stores, opened one Shoe Carnival branded store and closed one Shoe Carnival branded store in year-to-date 2023.
+Added: We opened four Shoe Station branded stores, opened one Shoe Carnival branded store and closed one Shoe Carnival branded store in year-to-date 2023.
Increasing market penetration by adding new stores is a key component of our growth strategy.
−Removed: We opened our 400 th store in August 2023 and are targeting operating over 500 stores in 2028.
+Added: We currently have 401 stores and are targeting operating over 500 stores in 2028.
This increased scale will be accomplished through a combination of both organic and acquired store growth.
7 unchanged sentences
Material covenants associated with the Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0.
−Removed: We were in compliance with these covenants as of July 29, 2023.
+Added: We were in compliance with these covenants as of October 28, 2023.
The Credit Agreement contains certain restrictions.
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During year-to-date 2023, we did not borrow or repay funds under the Credit Agreement.
−Removed: Letters of credit outstanding were $700,000 at July 29, 2023 and our borrowing capacity was $99.3 million.
+Added: Letters of credit outstanding were $700,000 at October 28, 2023 and our borrowing capacity was $99.3 million.
The terms “net worth”, “consolidated interest coverage ratio”, “consolidated funded indebtedness”, “consolidated rental expense”, “consolidated EBITDA”, “base rate”
1 unchanged sentence
are defined in the Credit Agreement.
−Removed: On June 20, 2023, the Board of Directors approved the payment of a second quarter 2023 cash dividend to our shareholders.
−Removed: The quarterly cash dividend of $0.10 per share was paid on July 19, 2023 to shareholders of record as of the close of business on July 5, 2023.
−Removed: In second quarter 2022, the dividend paid was $0.09 per share.
−Removed: During year-to-date 2023 and 2022, we returned $5.7 million and $5.1 million, respectively, to our shareholders through our quarterly cash dividends.
+Added: On September 21, 2023, the Board of Directors approved a 20% increase in our cash dividend paid to shareholders in third quarter 2023.
+Added: The quarterly cash dividend of $0.12 per share was paid on October 17, 2023 to shareholders of record as of the close of business on October 3, 2023.
+Added: In third quarter 2022, the dividend paid was $0.09 per share.
+Added: During year-to-date 2023 and year-to-date 2022, we returned $8.9 million and $7.5 million, respectively, to our shareholders through our quarterly cash dividends.
The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors, subject to restrictions as outlined above in the “Credit Agreement”
11 unchanged sentences
to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 28, 2023 for a further discussion of the Credit Agreement.
−Removed: No share repurchases have been made to date in fiscal 2023.
−Removed: During year-to-date 2022, we repurchased 682,886 shares of common stock at a total cost of $20.5 million.
+Added: During third quarter 2023, we repurchased 230,696 shares of common stock at a total cost of $5.4 million under the 2023 Share Repurchase Program.
+Added: As of October 28, 2023, we had $44.6 million available for future repurchases.
+Added: During year-to-date 2022, we repurchased 1.1 million shares of common stock at a total cost of $30.5 million.
We have three distinct peak selling periods:
6 unchanged sentences
We do not use interest rate derivative instruments to manage exposure to changes in market interest rates.
−Removed: We had no borrowings outstanding during second quarter 2023.
+Added: We had no borrowings outstanding during third quarter 2023.
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.