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Item 7. Management’s Discussion and Analysis

2025-03-21 compared with 2024-03-22 · 344 added, 293 removed, 734 unchanged (46% of the section changed)

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This section of this Annual Report on Form 10-K generally discusses Fiscal 2024 and Fiscal 2023 and year-over-year comparisons between Fiscal 2024 and Fiscal 2023.

A discussion of Fiscal 2021 and year-over-year comparisons between Fiscal 2022 and Fiscal 2021 that are not included in this Annual Report on Form 10-K can be found in PART II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended January 28, 2023, filed with the SEC on March 24, 2023.

We have included certain comparisons in this MD&A between Fiscal 2023 and Fiscal 2019 to provide further context regarding our Fiscal 2023 results of operations.

A discussion of Fiscal 2022 and year-over-year comparisons between Fiscal 2023 and Fiscal 2022 that are not included in this Annual Report on Form 10-K can be found in PART II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended February 3, 2024, filed with the SEC on March 22, 2024.

At the end of this section of this Annual Report on Form 10-K, we have included historical data for the past five fiscal years to facilitate trend analysis of key data reported in our consolidated financial statements and other select operating data.

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Shoe Carnival, Inc.

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

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

On December 3, 2021, we began operating under two banners:

Shoe Carnival and Shoe Station.

Our objective is to be the omnichannel retailer-of-choice for on-trend branded footwear for the entire family.

Our product assortment, whether shopping in a physical store or on our e-commerce platform, includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes.

We furthered our acquisition strategy by acquiring all of the stock of Rogan Shoes, Incorporated (“Rogan’s”) in February 2024, which added 28 physical stores (25 in Wisconsin, 2 in Minnesota, and 1 in Illinois) to our portfolio, positioned us as the market leader in Wisconsin and established a store base in Minnesota, creating additional expansion opportunities.

Our goal is to be the leading family footwear retailer in the United States.

Our product assortment, whether shopping in a physical store or through our e-commerce sales channel, is primarily branded footwear and includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes.

Our typical physical store carries shoes in two general categories – athletics and non-athletics with subcategories for men’s, women’s and children’s, as well as a broad range of accessories.

In addition to our physical stores, our e-commerce platform offers customers the same assortment of merchandise in all categories of footwear with expanded options in certain instances.

In addition to our physical stores, through our e-commerce sales channel, customers can purchase the same assortment of merchandise in all categories of footwear with expanded options in certain instances.

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

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

The Shoe Station banner and retail locations provide a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics.

The Shoe Station concept targets a more affluent family footwear customer and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands.

Due to the larger average size of our Shoe Station stores and the targeted, more affluent customer, these locations provide for a primary destination shopping experience.

We believe our distinctive shopping experiences give us various competitive advantages, including the building of a loyal, repeat customer base;

the creation of word-of-mouth advertising;

and enhanced sell-through of in-season goods.

Recent Acquisitions

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

("Shoe Station"), a privately-held, family-owned shoe retailer.

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

We continue to operate the original 21 locations acquired under the Shoe Station banner and have opened seven new Shoe Station bannered stores since the acquisition.

Net Sales attributed to the Shoe Station banner were $104.5 million and $99.9 million in Fiscal 2023 and Fiscal 2022, respectively, and $16.6 million from the acquisition date through January 29, 2022.

More information about this 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.

Subsequent to Fiscal 2023 year end, on February 13, 2024, we acquired all the stock of Rogan Shoes, Incorporated ("Rogan's").

More information about this acquisition can be found in Note 16 - “Subsequent Events” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Comparable Store Sales

Comparable store sales is a key performance indicator for us.

Comparable store sales include stores that have been open for 13 full months after such stores’ acquisition or grand opening prior to the beginning of the period, including those stores that have been relocated or remodeled.

Therefore, stores recently opened, acquired or closed are not included in comparable store sales.

We generally include e-commerce sales in our comparable store sales as a result of our omnichannel retailer strategy.

Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores.

E-commerce platforms associated with a physical store acquisition will not be included in comparable store sales until the initial physical stores are included.

The 21 original Shoe Station stores acquired and the www.shoestation.com e-commerce site that went live in early February 2023 were included in comparable store sales calculations beginning in the first quarter of Fiscal 2023.

The Shoe Station banner and retail locations serve a broader base of footwear customers.

The Shoe Station concept targets a more affluent footwear customer, and its product assortment includes higher end athletics and non-athletics shoes and more accessories.

Shoe Station has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands.

Recent Acquisition

On February 13, 2024, we acquired all of the stock of Rogan's, a privately-held 53-year-old work and family footwear company incorporated in Wisconsin, for an adjusted purchase price of $44.8 million, net of $2.2 million of cash acquired, which was paid with cash on hand.

Additional consideration of up to $5.0 million may be paid by the Company subject to the achievement of three-year growth targets.

Net sales from our Rogan’s operations were $80.3 million in Fiscal 2024.

More information about this acquisition can be found in Note 3 - “Acquisition of Rogan Shoes” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Comparable Stores Net Sales

Comparable stores Net Sales is a key performance indicator for us.

Comparable stores Net Sales include stores that have been open for 13 full months after such stores’ grand opening or acquisition prior to the beginning of the period, including those stores that have been relocated, remodeled or rebannered.

Therefore, stores recently opened, acquired or permanently closed are not included in comparable stores Net Sales.

We generally include e-commerce sales in our comparable stores Net Sales as a result of our omnichannel retailer strategy.

Due to our omnichannel retailer

strategy, we view e-commerce sales as an extension of our physical stores.

E-commerce sales channels associated with a physical store acquisition will not be included in comparable stores Net Sales until the initial physical stores are included.

The 21 original Shoe Station stores acquired and the www.shoestation.com e-commerce site that went live in early February 2023 were included in comparable stores Net Sales calculations beginning in first quarter 2023.

All of Rogan’s sales are excluded from our comparable stores Net Sales.

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

Fiscal 2023 consisted of the 53 weeks ended February 3, 2024, while Fiscal 2024 consisted of the 52 weeks ended February 1, 2025.

The 53 rd week in Fiscal 2023 caused a one-week shift in our fiscal calendar.

To minimize the effect of this fiscal calendar shift on comparable store sales, our reported annual comparable store sales results for Fiscal 2023 compare the 52-week period ended January 27, 2024 to the 52-week period ended January 28, 2023.

Net Sales in the 53 rd week of Fiscal 2023 totaled $14.4 million.

To minimize the effect of this fiscal calendar shift on comparable stores Net Sales, our reported annual comparable stores Net Sales results for Fiscal 2024 compare the 52-week period ended February 1, 2025 to the 52-week period ended February 3, 2024.

As such, changes in comparable stores Net Sales are not consistent with changes in Net Sales reported for the fiscal period.

Stores and Rebanner Strategy

We ended Fiscal 2024 with 430 stores, comprised of 360 Shoe Carnival stores, 42 Shoe Station stores and 28 Rogan's stores.

During Fiscal 2024 we opened four new Shoe Station stores and permanently closed two Shoe Carnival stores.

The 430 stores operated at the end of Fiscal 2024 was an all-time year end high for us.

We have been evaluating customer analytics and market data and developing strategies to expand Shoe Station since we acquired the chain in December 2021.

We believe that a national expansion opportunity exists in markets where the customer and/or market characteristics align better with the Shoe Station concept, rather than our Shoe Carnival concept.

A 10-store in-market test was completed during Fiscal 2024, where we closed underperforming Shoe Carnival stores and opened new Shoe Station stores in those markets.

The customer response and business results exceeded our success criteria on an aggregated basis, with sales and profit contribution over 10% higher at the new Shoe Station stores versus Shoe Carnival stores.

In March 2025, we announced a new long-term strategy to rapidly scale up Shoe Station into a national footwear and accessories leader.

The first investment phase will rebanner 175 stores to the Shoe Station banner over the next 24 months.

Once this phase is complete, we expect to operate 218 Shoe Station stores, representing 51% of our present store fleet.

During Fiscal 2025, we expect to rebanner between 50 to 75 Shoe Carnival stores to Shoe Station stores.

Total capital expenditures are expected to be in a range of $45 million to $60 million in Fiscal 2025 to support the rebanner strategy, compared to $33.2 million, $56.3 million and $77.3 million spent in Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively.

As the rebanner strategy is implemented, it is expected to decrease our Operating Income by between $20 to $25 million in Fiscal 2025 due to store closing costs, amortization of new store construction costs, a four-to-six-week store closure period through each store’s grand opening and customer acquisition costs, with such costs recovered over a two-to-three-year period following a store’s grand opening.

More information about the rebanner strategy can be found in PART 1, ITEM 1, “Business—Our Stores—Rebanner Strategy” of this Annual Report on Form 10-K.

Executive Summary

In Fiscal 2023, our results were impacted by continuing inflation, higher interest rates, and reduced tax refunds.

These economic factors particularly impacted our Shoe Carnival banner and its lower income customers and more urban markets.

Our Diluted Net Income per Share ("EPS") earned in Fiscal 2023 was $2.68 compared to $3.96 earned in Fiscal 2022.

The primary driver of the lower EPS in Fiscal 2023 compared to Fiscal 2022 was an $86.4 million, or 6.8%, decline in Net Sales, with our Shoe Carnival banner down 7.8%, offset by a 4.5% increase from our Shoe Station banner.

Within this more challenging economic environment, Fiscal 2023 was impacted by event-driven shopping during the peak back-to-school and holiday shopping periods and soft sales of seasonal merchandise and sales during non-peak periods compared to Fiscal 2022.

During these peak shopping periods, our children’s categories outperformed every other category.

Tax refunds in Fiscal 2023 were nearly 9% lower than Fiscal 2022, which significantly impacted our spring sales.

Primarily because of these lower seasonal sales and sales during non-peak periods, traffic in our physical stores was down 9% in Fiscal 2023 compared to Fiscal 2022 and comparable sales were down 8.8%.

As a result of e-commerce growth, new stores and integration of our Shoe Perks loyalty program into our Shoe Station stores, we grew Net Sales under our Shoe Station banner in Fiscal 2023 compared to Fiscal 2022.

Our Shoe Perks members grew 7.3% in Fiscal 2023 compared to Fiscal 2022 and comprised 34.4 million members at the end of Fiscal 2023.

In Fiscal 2023 Operating Income margin for the Shoe Station banner was accretive to our overall Operating Income margin.

Long-term Profit Transformation

As part of our long-term growth strategy, we have invested significantly in customer relationship management (“CRM”) capabilities, e-commerce infrastructure, modernization of our store fleet, and acquisitions as key drivers of profitable growth.

Since Fiscal 2019, our Diluted Net Income Per Share has increased 84%, Gross Profit margin expanded 570 basis points, and Net Sales grew 13%.

With this increased profitability, we have increased our quarterly dividend.

The recently approved dividend that will be paid in the first quarter of Fiscal 2024 of $0.135 per share has increased 238% from the quarterly dividend paid in early Fiscal 2019.

Merchandise Inventory

We made significant progress throughout Fiscal 2023 to reduce our Merchandise Inventories and optimize our inventory positions for an improved athletic assortment.

At the end of Fiscal 2023, Merchandise Inventories were $43.9 million, or 11%, lower than at the end of Fiscal 2022.

This reduction in inventory was a primary driver of our improved cash flow from operations in Fiscal 2023, which totaled $122.8 million, an increase of $72.3 million compared to Fiscal 2022.

We expect additional reductions in inventory in Fiscal 2024, excluding the impact from the Rogan’s acquisition.

C apital Management

Fiscal 2023 marked the 19th consecutive year we ended the fiscal year with no debt, and in each of the last three years, we have not drawn on our credit facility.

We ended Fiscal 2023 with $111.2 million of Cash, Cash Equivalents and Marketable Securities and $99.3 million in borrowing capacity.

On February 13, 2024, we utilized approximately $45 million of this liquidity to acquire Rogan’s with cash on hand.

Store Growth and Store Modernization

We ended Fiscal 2023 with 400 total stores, comprising 372 Shoe Carnival stores and 28 Shoe Station stores.

During Fiscal 2023, we opened four Shoe Station stores and one Shoe Carnival Store and closed two Shoe Carnival stores.

Including the recently acquired Rogan’s stores, we expect to operate 430 to 432 stores by the end of Fiscal 2024, representing net growth of 30 to 32 stores.

We have a strategic growth roadmap in place to surpass 500 stores in 2028, inclusive of organic and acquired activity.

After the Rogan's acquisition, we began operating an all-time high 429 stores.

During Fiscal 2023, we modernized 53 Shoe Carnival bannered stores.

We continue to modernize our store fleet.

As of February 3, 2024, 60% of our Shoe Carnival stores were modernized and we expect to modernize additional stores in Fiscal 2024.

Total capital expenditures are expected to be in a range of $25 million to $35 million in Fiscal 2024 and lower than Fiscal 2023 and Fiscal 2022 as the store modernization program nears completion.

We also modernized and relaunched our www.shoecarnival.com website in late October 2023 and in February 2023 launched our www.shoestation.com website.

Combined with our advanced CRM capabilities, these investments enhance our customers’ omnichannel interaction with us and support our ability to drive long-term, sustainable growth.

The relaunched www.shoecarnival.com website incorporates improvements in search capability, use of predictive analytics and improved product imagery and speed of operation.

During Fiscal 2024, our Net Sales of $1.2 billion were up $27.0 million, or 2.3%, compared to Fiscal 2023.

Fiscal 2023 contained a 53rd week of Net Sales totaling approximately $15 million, as described above.

In Fiscal 2024, Net Sales otherwise increased approximately $42 million, or 3.7%.

This increase resulted from continued growth from the Shoe Station banner’s 5.7% Net Sales increase and $80.3 million in Net Sales attributed to Rogan’s.

We also grew Net Sales during peak shopping periods throughout the year.

These areas of growth were partially offset by a 3.9% comparable stores Net Sales decline, driven primarily by Shoe Carnival declines during non-event periods.

Long-term Gross Profit margin expansion has been a key driver of our profit transformation, led by our targeted promotional plans, buying strategies and growth of our customer loyalty program, Shoe Perks.

During Fiscal 2024, our Gross Profit margin was above 35% for the fourth consecutive year.

Gross profit margin in Fiscal 2024 decreased 20 basis points compared to Fiscal 2023, primarily due to higher buying, distribution and occupancy costs (“BDO”) from operating more stores, partially offset by a 10 basis point increase in merchandise margins.

In Fiscal 2024, our Selling, General, and Administrative Expenses (“SG&A”) were higher than Fiscal 2023 by $9.8 million, primarily due to incremental costs associated with Rogan’s.

As market conditions softened in the third and

fourth quarters of Fiscal 2024 during non-event periods, we lowered selling costs at our comparable stores.

These lower selling expenses reflected optimized advertising spend, driven by our digital-first marketing strategy.

While Rogan’s costs were an additional expense in Fiscal 2024 compared to Fiscal 2023, those cost increases were mitigated by synergies captured during Fiscal 2024 from our accelerated integration of Rogan’s.

Fiscal 2024 Operating Income totaled $91.2 million, a decrease of 2.5% versus Fiscal 2023, primarily due to the extra week of sales in Fiscal 2023 and non-event period declines at Shoe Carnival stores, partially offset by Net Sales growth, principally from our Shoe Station and Rogan’s stores.

Primarily as a result of accelerated synergy capture, Rogan’s exceeded our initial $10 million Operating Income target for Fiscal 2024 by more than 20%.

Fiscal 2024 Net Income was $73.8 million, or $2.68 per diluted share, compared to Fiscal 2023 Net Income of $73.3 million, or $2.68 per diluted share.

The slight increase in Net Income reflected pandemic-related tax credits of $3.0 million associated with our acquisition of Rogan’s, included in Interest and Other Income, partially offset by lower Operating Income and a higher effective tax rate.

Capital Management and Inventories

Fiscal 2024 marked the 20th consecutive fiscal year end where we ended the fiscal year with no debt.

In each of the last four years, we have funded our operations and growth investments, including our acquisitions of Shoe Station and Rogan’s, without drawing on our credit facility.

We ended Fiscal 2024 with $123.1 million of Cash, Cash Equivalents and Marketable Securities.

Cash flows from operations in Fiscal 2024 totaled $102.6 million.

In Fiscal 2024, we paid $44.8 million for Rogan’s with cash on hand.

Merchandise Inventories totaled $385.6 million at the end of Fiscal 2024, an increase of $39.2 million compared to the end of Fiscal 2023, primarily reflecting Rogan’s acquired inventory.

Merchandise Inventories supporting the Shoe Carnival and Shoe Station stores were slightly down on a unit basis at the end of Fiscal 2024 compared to the end of Fiscal 2023, but additional inventory purchases were made near Fiscal 2024 year end to support rebannering additional stores and, to a lesser extent, as a hedge against potential supply chain disruption from tariffs and port worker strikes.

Results of Operations

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Operating income

Interest income

Interest and other income

Interest expense

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Fiscal 2024 Compared to Fiscal 2023

Net Sales were $1.18 billion in Fiscal 2023 and decreased 6.8% compared to Fiscal 2022.

The decrease was primarily due to an 8.8% comparable store sales decline, partially offset by the $14.4 million effect of the 53 rd week in Fiscal 2023.

The comparable store sales decline resulted 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.

Net Sales through our e-commerce sales channel were also 7.7.% lower than in Fiscal 2022.

We believe the lower physical store traffic and e-commerce sales in Fiscal 2023 were primarily due to persistent inflation, higher interest rates and a reduction in first quarter 2023 federal tax refunds compared to 2022.

Net Sales attributable to new stores, mostly new Shoe Station stores, partially offset the decrease in comparable store sales.

Net Sales were $1.2 billion in Fiscal 2024 and increased 2.3%, or $27.0 million, compared to Fiscal 2023.

The increase was primarily due to continued growth from the Shoe Station banner’s 5.7% Net Sales increase and the acquisition of Rogan's in February 2024, which added Net Sales of $80.3 million.

Increases were partially offset by the extra week in the prior year, which reduced Net Sales approximately $15 million, and a 3.9% decrease in comparable stores Net Sales, primarily due to a mid-single digit decline from our Shoe Carnival bannered stores.

The comparable stores Net Sales decline resulted primarily from an approximate 5% decrease in traffic in our physical stores resulting in an approximate 6% decrease in units sold.

E-commerce sales were approximately 10% of merchandise sales in both Fiscal 2024 and Fiscal 2023.

Gross Profit was $421.4 million in Fiscal 2023, a decrease of $46.8 million compared to Fiscal 2022.

Gross Profit was $428.8 million in Fiscal 2024, an increase of $7.4 million compared to Fiscal 2023, primarily due to the $27.0 million increase in Net Sales.

Gross profit margin in Fiscal 2024 was 35.6% compared to 35.8% in Fiscal 2023.

Merchandise margin decreased 90 basis points, reflecting an increase in promotional intensity and shifting product mix.

Buying, distribution and occupancy costs (“BDO”) were lower in Fiscal 2023 compared to Fiscal 2022;

however, BDO decreased gross profit margin by 40 basis points due to the lower Net Sales in Fiscal 2023.

The BDO costs were lower in Fiscal 2023 as freight and distribution costs declined versus Fiscal 2022 through active management, contract renegotiation and normalization, partially offset by our investments in store modernization and by rent associated with operating more stores.

Selling, General and Administrative Expenses ("SG&A")

This slight decrease was driven by stable merchandise margins that were up 10 basis points in Fiscal 2024 compared to Fiscal 2023 but were more than offset by BDO as a percentage of Net Sales that deleveraged 30 basis points on increased occupancy costs from operating more stores.

Selling, General and Administrative Expenses

SG&A increased $9.8 million in Fiscal 2024 to $337.6 million compared to $327.9 million in Fiscal 2023.

The increase was primarily attributable to new and modernized store costs, including increased depreciation expense resulting from our investment in property and equipment related to our store portfolio modernization plan.

As a percentage of Net Sales, SG&A was 27.8% in Fiscal 2023 compared to 25.5% in Fiscal 2022.

Fiscal 2023 SG&A included $0.8 million of transaction costs related to the Rogan's acquisition.

Additional information regarding the Rogan’s acquisition can be found in Note 16 - “Subsequent Events” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Interest Income and Interest Expense

Changes in our interest income and expense increased our income before taxes by $2.0 million in Fiscal 2023 compared to Fiscal 2022.

This increase was primarily due to higher interest earned on invested cash balances.

The increase was primarily due to incremental costs associated with Rogan's in Fiscal 2024, partially offset by lower selling costs at Shoe Carnival and Shoe Station stores, which reflected optimized advertising spend driven by our digital-first marketing strategy.

As a percentage of Net Sales, SG&A were 28.0% in Fiscal 2024, compared to 27.8% in Fiscal 2023.

Interest and Other Income and Interest Expense

Changes in our Interest and Other Income and our Interest Expense increased our Income Before Income Taxes by $3.7 million in Fiscal 2024 compared to Fiscal 2023.

This increase was primarily due to pandemic-related tax credits of $3.0 million associated with our acquisition of Rogan's in February 2024 and also higher interest earned on invested cash balances.

The effective income tax rate for Fiscal 2024 was 24.3% compared to 23.7% for Fiscal 2023.

The lower effective tax rate was reflective of a greater tax rate benefit from the vesting of equity based compensation and a nonrecurring benefit associated with state deferred taxes.

The higher effective tax rate was due to the decrease in tax benefits from share-settled equity awards in Fiscal 2024 and a state deferred tax benefit included in Fiscal 2023 that did not recur in Fiscal 2024, partially offset by impacts associated with our acquisition of Rogan’s.

Liquidity and Capital Resources

Our primary sources of liquidity are $123.1 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of Fiscal 2024, cash generated from operations and availability under our $100 million Credit Agreement.

Subsequent to Fiscal 2023 year end, we acquired Rogan's and paid cash totaling approximately $45 million on the closing date of the acquisition.

We believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months.

Our primary uses of cash are normally for working capital, which are principally inventory purchases, investments in our stores, such as new stores, modernization/remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program and the financing of other capital projects, including investments in new systems.

As part of our growth strategy, we may also pursue additional strategic acquisitions of other footwear retailers.

Our primary uses of cash are normally for working capital, which are principally inventory purchases, investments in our stores, such as rebanners and new stores, remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program and the financing of other capital projects, including investments in new systems.

As part of our growth strategy, we have also pursued strategic acquisitions of other footwear retailers.

Cash Flow - Operating Activities

Net cash generated from operating activities was $102.6 million in Fiscal 2024 compared to $122.8 million during Fiscal 2023.

The increase in operating cash flow was primarily driven by reduced inventory purchases, partially offset by decreased Net Income in Fiscal 2023 compared to Fiscal 2022.

Working capital increased on a year-over-year basis and totaled $353.5 million at February 3, 2024 compared to $312.4 million at January 28, 2023.

The increase was primarily attributable to higher cash and lower Accounts Payable balances, partially offset by lower Merchandise Inventories levels.

Our current ratio was 3.8 as of February 3, 2024, compared to 3.0 as of January 28, 2023.

The decrease in operating cash flow was primarily driven by the timing of increased inventory purchases to support our rebanner strategy, new Shoe Station stores and, to a lesser extent, as a hedge against potential supply chain disruption from tariffs and port worker strikes, and the timing of prepaid contracts payments in Fiscal 2024 compared to Fiscal 2023.

Working capital increased on a year-over-year basis and totaled $405.7 million at February 1, 2025 compared to $353.5 million at February 3, 2024.

The increase was primarily attributable to higher Merchandise Inventories and Accounts Receivable, primarily due to the acquisition of Rogan's, higher cash balances and lower Accounts Payable, partially offset by an increase in Accrued and Other Liabilities.

Our current ratio was 4.1 as of February 1, 2025, compared to 3.8 as of February 3, 2024.

Cash Flow - Investing Activities

Our cash outflows for investing activities are normally for capital expenditures.

During Fiscal 2023 and Fiscal 2022, we expended $56.3 million and $77.3 million, respectively, for the purchases of property and equipment, primarily related to our store portfolio modernization plan.

During Fiscal 2024 and Fiscal 2023, we expended $33.2 million and $56.3 million, respectively, for the purchases of property and equipment, primarily related to store remodels and rebanners and opening four new Shoe Station stores.

Our Rogan’s acquisition in first quarter 2024 resulted in the payment of cash consideration of $44.8 million, net of cash acquired in Fiscal 2024.

Additional information regarding the Rogan’s acquisition, including information on the additional contingent consideration of up to $5.0 million, can be found in Note 3 — “Acquisition of Rogan Shoes” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our non-qualified deferred compensation plan.

The balance of these Marketable Securities was $14.4 million at February 1, 2025, compared to $12.2 million at February 3, 2024.

Additional information can be found in Note 4 — “Fair Value Measurements” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.

Cash Flow - Financing Activities

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During Fiscal 2024, net cash used in financing activities was $15.3 million compared to $20.5 million during Fiscal 2023.

The decrease in net cash used in financing activities was primarily due to the repurchase of $5.4 million of shares in Fiscal 2023, compared to the repurchase of $30.5 million of shares in Fiscal 2022, associated with our Board of Directors’ authorized share repurchase program.

The decrease in net cash used in financing activities was primarily due to the repurchase of $5.4 million of shares in Fiscal 2023 under our Board of Directors’ authorized share repurchase program compared to none in Fiscal 2024 and the decrease in shares surrendered by employees to pay taxes on stock-based compensation awards, partially offset by increased dividend payments.

During Fiscal 2024 and Fiscal 2023, we did not borrow or repay funds under our Credit Agreement.

Letters of credit outstanding were $700,000 at February 3, 2024, and our borrowing capacity was $99.3 million.

Letters of credit outstanding were $1.0 million at February 1, 2025, and our borrowing capacity was $99.0 million.

Our Credit Agreement requires us to maintain compliance with various financial covenants.

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We were in compliance with these covenants as of February 1, 2025.

Store Openings and Closings – Fiscal 2024

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

Through a combination of both organic and acquired store growth, we aim to operate approximately 30 new stores, inclusive of the 28 Rogan's stores acquired on February 13, 2024, in Fiscal 2024 and are targeting operating over 500 stores in 2028.

Store Rebanners, Openings and Closings – Fiscal 2025

As previously discussed, we plan to rebanner between 50 to 75 Shoe Carnival stores into Shoe Station stores in Fiscal 2025 as the first part of the first investment phase.

We plan to complete an additional 100 or more rebanners in Fiscal 2026 and early Fiscal 2027 as the second part of the first investment phase.

Once this investment phase is complete,

we expect to operate 218 Shoe Station stores, representing 51% of our present store fleet.

Additional rebanners may follow.

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

We expect limited store closures over the next several years.

Future store growth may continue to be impacted by macroeconomic uncertainty, our ability to identify desirable locations and/or acquisition partners and increased focus on our store rebanner strategy.

Capital Expenditures – Fiscal 2025

Capital expenditures for Fiscal 2024 are expected to be between $25 million and $35 million, with approximately $15 million to $20 million to be used for new stores and modernization and approximately $10 million to $15 million for upgrades to our Evansville distribution center and e-commerce platform, various other store improvements, continued investments in technology and normal asset replacement activities.

Capital expenditures for Fiscal 2025 are expected to be between $45 million and $60 million, with approximately $35 million to $45 million to be used for new and rebannered stores and remodels and approximately $10 million to $15 million for upgrades to our Evansville distribution center and e-commerce platform, various other store improvements, continued investments in technology and normal asset replacement activities.

The resources allocated to projects are subject to near-term changes depending on potential inflationary, supply chain and other macroeconomic impacts.

Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, relocated, and remodeled, and the amount of lease incentives, if any, received from landlords.

Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, rebannered, relocated and remodeled, and the amount of lease incentives, if any, received from landlords.

The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.

During Fiscal 2023, we paid quarterly cash dividends of $0.10 per share in our first and second fiscal quarters and $0.12 per share in the third and fourth fiscal quarters.

In Fiscal 2022 four quarterly dividends of $0.09 per share were approved and paid.

During Fiscal 2024, four quarterly cash dividends of $0.135 per share were approved and paid.

In Fiscal 2023, we paid quarterly cash dividends of $0.10 per share in our first and second fiscal quarters and $0.12 per share in the third and fourth fiscal quarters.

During Fiscal 2024 and Fiscal 2023, we returned $14.7 million and $12.2 million, respectively, in cash to our shareholders through our quarterly dividends.

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The 2025 Share Repurchase Program replaced a $50 million share repurchase program that was authorized in December 2023, became effective January 1, 2024 and expired in accordance with its terms on December 31, 2024.

Shares totaling 230,696 were repurchased during Fiscal 2023 at a cost of $5.4 million.

Shares totaling 1,134,524 were repurchased during Fiscal 2022 at a cost of $30.5 million.

No shares were repurchased during Fiscal 2024 and shares totaling 230,696 were repurchased during Fiscal 2023 at a cost of $5.4 million.

Rent-related payments made in Fiscal 2024 totaled $97.2 million.

As we are contractually obligated to make lease payments to landlords, estimated future payments to landlords and lease-related charges are expected to be significant in future years and will increase in future years due to expected organic and acquired store growth.

As we are contractually obligated to make lease payments to landlords, estimated future payments to landlords and lease-related charges are expected to be significant

in future years and will increase in future years due to expected organic and acquired store growth.

These payments include estimates for fixed minimum and contingent rent, estimated reimbursements to landlords for common area maintenance, taxes and insurance and other occupancy related charges.

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Store Openings, Closings and Impairment Charges – Impact on Fiscal 2024 and Fiscal 2023

In Fiscal 2023, we opened five new stores.

The initial average inventory investment for the new stores in Fiscal 2023 was $1.0 million, capital expenditures were $1.7 million and lease incentives received from our landlords were $480,000.

In Fiscal 2024, we opened four new stores.

The initial average inventory investment for the new stores in Fiscal 2024 was $1.2 million, capital expenditures were $1.3 million and lease incentives received from our landlords were $425,000.

In Fiscal 2023, we opened five new stores.

The initial average inventory investment for the new stores was $1.0 million, capital expenditures were $1.7 million and lease incentives received from our landlord were $480,000.

Pre-opening expenses for the five stores opened in Fiscal 2023 included in Cost of Sales and SG&A expenses were approximately $1.2 million, or an average of $237,000 per store.

Pre-opening expenses for the four stores opened in Fiscal 2024 included in Cost of Sales and SG&A were approximately $786,000, or an average of $197,000 per store.

Items classified as pre-opening expenses include rent, freight, advertising, salaries and supplies.

During Fiscal 2022, we expended approximately $1.3 million, or an average of $320,000 per store, in pre-opening expenses for the four new stores.

Total store closing costs were $83,000 associated with closing two stores in Fiscal 2023 and there were no store closing costs in Fiscal 2022.

During Fiscal 2023, we expended $1.2 million, or an average of $237,000 per store, in pre-opening expenses for the five new stores.

Total store closing costs were $128,000 associated with the closing of two stores in Fiscal 2024 and $83,000 associated with the closing of two stores in Fiscal 2023.

There were no non-cash impairment charges recognized in Fiscal 2024 and Fiscal 2023.

In addition to non-cash impairment charges, store closing costs can include fixed asset write-offs, employee severance,

lease termination fees, store tear-down and clean-up expenses and acceleration of expenses and deferred lease incentives.

In total, store opening and closing costs impacting SG&A expenses were $0.9 million in Fiscal 2023 and $1.0 million in Fiscal 2022.

In addition to non-cash impairment charges, store closing costs can include fixed asset write-offs, employee severance, lease termination fees, store tear-down and clean-up expenses and acceleration of expenses and deferred lease incentives.

In total, store opening and closing costs impacting SG&A were $616,000 in Fiscal 2024 and $891,000 in Fiscal 2023.

Store opening and closing costs included in Cost of Sales were expenses of $298,000 in Fiscal 2024 and $376,000 in Fiscal 2023.

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Merchandise Inventories as of February 1, 2025 totaled $385.6 million, representing approximately 34% of total assets.

Merchandise Inventories as of January 28, 2023 totaled $390.4 million, representing approximately 39% of total assets.

Merchandise Inventories as of February 3, 2024 totaled $346.4 million, representing approximately 33% of total assets.

Given the significance of inventories to our consolidated financial statements, the determination of net realizable value is a critical accounting estimate.

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If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.

Valuation of Goodwill and Intangible Assets – Our indefinite-lived assets include Goodwill and non-amortizing Intangible Assets (trade name) resulting from the acquisition of Shoe Station in Fiscal 2021.

Valuation of Goodwill and Intangible Assets – Our indefinite-lived assets include Goodwill and non-amortizing Intangible Assets (trade names) resulting from the acquisitions of Shoe Station in Fiscal 2021 and Rogan's in Fiscal 2024.

Goodwill represents the purchase price in excess of fair values assigned to the underlying identifiable net assets of the acquired business.

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We perform our annual impairment testing as of the first day of the fourth fiscal quarter.

In performing impairment tests for our Goodwill in Fiscal 2023, we opted to complete a quantitative assessment at the Shoe Station banner level as opposed to relying on a qualitative assessment as permitted in the guidance.

This quantitative assessment required that the estimated fair value of a reporting unit’s net assets, including Goodwill, be calculated and compared to its carrying amount.

If that estimated fair value is in excess of the carrying amount, no impairment is recognized.

We performed this assessment on October 29, 2023.

We estimated the fair value of the net assets tested using a discounted cash flow model and guideline transaction market approach.

The income-based approach required significant judgment to estimate future cash flows, including revenue growth inclusive of long-term growth rate assumptions and the discount rate.

The guideline transaction market approach included 20 majority stake acquisition transactions in the footwear and apparel retail industries over the last 12 years.

With respect to the trade name, we also tested its carrying amount for impairment at the Shoe Station banner level using the same revenue growth and discount rate assumptions and an assumed royalty rate.

Goodwill is reviewed for impairment at our single reporting unit level.

We have the option to either first perform a qualitative assessment to determine whether it is “more likely than not” that the reporting unit's fair value is less than its carrying value, or to proceed directly to the quantitative assessment, which requires a comparison of the reporting unit's fair value to its carrying value.

Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, expense factors, overall financial performance, entity specific and reporting unit events, capital markets and pricing and breakeven multiples.

If we determine that the fair value of our reporting unit is less than its carrying value, we recognize an impairment charge equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit.

In performing an impairment test for our Goodwill in Fiscal 2024, we completed the qualitative assessment on November 3, 2024.

We determined that it was not “more likely than not” that the fair value of our reporting unit was less than the carrying value;

therefore, no quantitative assessment was performed and no impairment was recorded.

With respect to the trade names, we tested their carrying amounts for impairment in Fiscal 2024 at the Shoe Station store set and Rogan’s store set levels using respective revenue growth and discount rate assumptions and assumed royalty rates.

Significant changes in our estimates and assumptions could affect our fair value calculations.

Our estimate of fair value exceeded the carrying amounts and therefore resulted in no impairment.

We performed these assessments on November 3, 2024 and our estimate of fair values exceeded the carrying amounts;

therefore, no impairments were recorded.

Leases – We lease our retail stores, our Evansville distribution center and office space for our Southern office.

We also enter into leases of equipment, copiers and billboards.

All of our leases are operating leases.

We also enter into leases of equipment and other assets.

Substantially all of our leases are operating leases.

Therefore, how operating leases are recognized throughout the financial statements in accordance with applicable accounting guidance can have a significant impact on our financial condition and results of operations and related disclosures.

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842 – Leases (“ASC 842”), on the lease commencement date we recognize a right-of-use asset for the right to use a leased asset and a liability based on the present value of remaining lease payments over the lease term.

The weighted average discount rate utilized in Fiscal 2023 and Fiscal 2022 was 4.2%.

For new leases, renewals or amendments and when we make material investments in leased properties pursuant to our store modernization plan, we make certain estimates and assumptions regarding property values, market rents, property lives, discount rates and probable terms.

The weighted average discount rate utilized in Fiscal 2024 and Fiscal 2023 was 4.7% and 4.2%, respectively.

For new leases, renewals or amendments and when we make material investments in leased properties pursuant to our emerging rebanner strategy or store modernization plan, we make certain estimates and assumptions regarding property values, market rents, property lives, discount rates and probable terms.

These estimates and assumptions can impact:

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(3) the term over which leasehold improvements for each store are amortized;

and (4) the values and lives of adjustments to initial and modified right-of-use assets.

and (4) the values and lives of adjustments to initial and

modified right-of-use assets.

The amount of amortized rent expense would vary if different estimates and assumptions were used.

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Our temporary timing differences relate primarily to inventory, property and equipment, right-of-use assets, operating lease liabilities, goodwill and non-amortizing intangible assets.

Deferred tax assets and liabilities are measured using the tax rates enacted and expected to be in

effect in the years when those temporary differences are expected to reverse.

Deferred tax assets and liabilities are measured using the tax rates enacted and expected to be in effect in the years when those temporary differences are expected to reverse.

Deferred tax assets are reduced, if necessary, by a valuation allowance to the extent future realization of those tax benefits are uncertain.

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Cash and cash equivalents

Total assets (3)

Long-term debt

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Stores open at end of year

Comparable store sales (2)(4)

Comparable stores net sales (2)(3)

Square footage of store space at year

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

Unless otherwise stated, references to years 2023, 2022, 2021, 2020 and 2019 relate respectively to the fiscal years ended February 3, 2024, January 28, 2023, January 29, 2022, January 30, 2021 and February 1, 2020.

Unless otherwise stated, references to years 2024, 2023, 2022, 2021 and 2020 relate respectively to the fiscal years ended February 1, 2025, February 3, 2024, January 28, 2023, January 29, 2022 and January 30, 2021.

Fiscal 2023 consisted of 53 weeks and fiscal years 2024, 2022, 2021 and 2020 all consisted of 52 weeks.

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The 53rd week in Fiscal 2023 caused a one-week shift in our fiscal calendar.

(3) In Fiscal 2019, we adopted ASC 842 on a modified retrospective basis, which required us to recognize leased assets and obligations on our balance sheet.

See Note 10 – “Leases” in our Notes to Consolidated Financial Statements included in PART II, ITEM 8 of this Annual Report on Form 10-K for further discussion.

(4) Comparable store sales for the periods indicated include stores that have been open for 13 full months after such stores’ acquisition or grand opening prior to the beginning of the period, including those stores that have been relocated or remodeled.

Therefore, stores opened, acquired or closed during the periods indicated are not included in comparable store sales.

We include e-commerce sales in our comparable store sales.

To minimize the effect of this fiscal calendar shift on comparable stores Net Sales, our reported annual comparable stores Net Sales results for Fiscal 2023 compare the 52-week period ended January 27, 2024 to the 52-week period ended January 28, 2023, and our comparable stores Net Sales results for fiscal 2024 compare the 52-week period ended February 1, 2025 to the 52-week period ended February 3, 2024.

(3) Comparable stores Net Sales for the periods indicated include stores that have been open for 13 full months after such stores’ acquisition or grand opening prior to the beginning of the period, including those stores that have been rebannered, relocated or remodeled.

Therefore, stores opened, acquired or closed during the periods indicated are not included in comparable stores Net Sales.

We include e-commerce sales in our comparable stores Net Sales.

Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores.

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(6) In fiscal years 2021 and 2020, average sales per store and average sales per square foot include only Shoe Carnival banner stores.

(7) On June 21, 2021, our Board of Directors authorized a two-for-one stock split of the shares of our common stock.

All share and per share amounts have been adjusted retroactively for all periods presented.

QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK

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We have audited the accompanying consolidated balance sheets of Shoe Carnival, Inc.

and subsidiaries (the "Company") as of February 3, 2024 and January 28, 2023, the related consolidated statements of income, shareholders’ equity, and cash flows, for each of the three years in the period ended February 3, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 3, 2024 and January 28, 2023, and the results of its operations and its cash flows for each of the three years in the period ended February 3, 2024, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of February 1, 2025 and February 3, 2024, the related consolidated statements of income, shareholders’ equity, and cash flows, for each of the three years in the period ended February 1, 2025, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 1, 2025 and February 3, 2024, and the results of its operations and its cash flows for each of the three years in the period ended February 1, 2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of February 1, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 21, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.

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Merchandise inventories are stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method.

Factors considered in determining if inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from vendors and current and expected future sales trends.

The Company also reviews aging trends, which include the historical rate at which merchandise has sold below original cost and the value and nature of merchandise currently held in inventory and priced below original cost.

Factors considered in determining if inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, historical loss rates, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from vendors and current and expected future sales trends.

The Company also reviews aging trends, which include the historical rate at which merchandise has sold below cost and the value and nature of merchandise currently held in inventory and priced below original cost.

The Company reduces the value of inventory to its estimated net realizable value where cost exceeds the estimated future selling price.

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Our audit procedures related to the significant judgments made by management to determine net realizable value of inventory included the following procedures, among others:

• We tested the effectiveness of the Company’s internal control over the valuation of inventory, including the review and determination of the anticipated net realizable value of merchandise inventories compared to the cost value of inventory on-hand.

• We tested the operating effectiveness of the Company’s internal control over the valuation of inventory, including the review and determination of the anticipated net realizable value of merchandise inventories compared to the cost value of inventory on-hand.

• We tested the recorded inventory reserve by developing an expectation based on the prior year inventory reserve balance relative to the merchandise inventory balance at the prior year balance sheet date and compared it to the actual reserve recorded in the current year.

• We evaluated the reasonableness of management’s determination of the net realizable value of inventory by:

• Testing the accuracy of source data used in the calculation, including inventory on hand, aging of inventory, historical losses by product category, sales prices and consideration received from vendors.

• Testing the accuracy of source data used in the calculation, including inventory on hand, historical losses by product category, sales prices and consideration received from vendors.

• Recalculating the projected loss for inventory on hand based on the source data used in the calculation.

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Operating income

Interest income

Interest and other income

Interest expense

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Stock-based compensation

Balance at January 28, 2023

Balance at February 3, 2024

Dividends ($ 0.54 per share)

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compensation awards

Purchase of common stock for

Stock-based compensation

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Stock-based compensation

Loss (Gain) on retirement and impairment of assets, net

(Gain) Loss on retirement and impairment of assets, net

Deferred income taxes

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Purchases of property and equipment

Investments in marketable securities and other

Investments in marketable securities

Sales of marketable securities and other

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Dividends declared but not yet paid

Contingent consideration related to business acquisition

See notes to consolidated financial statements.

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Our consolidated financial statements include the accounts of Shoe Carnival, Inc.

and its wholly-owned subsidiaries SCHC, Inc.

and its wholly-owned subsidiaries Rogan Shoes, Incorporated (“Rogan’s”), SCHC, Inc.

and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned subsidiary of SCHC, Inc.

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All intercompany accounts and transactions have been eliminated.

We are an omnichannel retailer selling footwear and related products through our retail stores located in 35 states within the continental United States and in Puerto Rico as of February 3, 2024, as well as through our e-commerce platform.

On June 21, 2021, our Board of Directors authorized a two -for-one stock split of the shares of our common stock.

The stock split entitled each shareholder of record at the close of business on July 6, 2021 to receive one additional share of common stock for each share of common stock owned as of that date and was paid on July 19, 2021.

Upon the completion of the stock split, our outstanding shares increased from approximately 14.1 million shares to approximately 28.2 million shares.

All share and per share amounts in this Annual Report on Form 10-K give effect to the stock split and have been adjusted retroactively for all periods presented.

We are one of the nation’s largest omnichannel family footwear retailers, selling footwear and related products through our retail stores located in 36 states within the continental United States and in Puerto Rico, as well as through our e-commerce sales channel.

Note 2 – Summary of Significant Accounting Policies

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

Unless otherwise stated, references to years 2023, 2022 and 2021 relate to the fiscal years ended February 3, 2024 ("Fiscal 2023"), January 28, 2023 ("Fiscal 2022") and January 29, 2022 ("Fiscal 2021"), respectively.

Unless otherwise stated, references to years 2024, 2023 and 2022 relate to the fiscal years ended February 1, 2025 (“Fiscal 2024”), February 3, 2024 (“Fiscal 2023”) and January 28, 2023 (“Fiscal 2022”), respectively.

Fiscal 2023 consisted of 53 weeks while Fiscal 2024 and Fiscal 2022 consisted of 52 weeks.

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Cash and Cash Equivalents

We had Cash and Cash Equivalents of $ 99.0 million at February 3, 2024 and $ 51.4 million at January 28, 2023.

Credit and debit card receivables and receivables due from a third party totaling $ 7.2 million and $ 6.3 million were included in cash equivalents at February 3, 2024 and January 28, 2023 , respectively.

We had Cash and Cash Equivalents of $ 108.7 million at February 1, 2025 and $ 99.0 million at February 3, 2024.

Credit and debit card receivables and receivables due from a third party totaling $ 6.9 million and $ 7.2 million were included in cash equivalents at February 1, 2025 and February 3, 2024 , respectively.

Credit and debit card receivables generally settle within three days ;

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We consider all short-term investments with an original maturity date of three months or less to be cash equivalents.

As of February 3, 2024 and January 28, 2023 , all invested cash was held in money market mutual funds.

As of February 1, 2025 and February 3, 2024 , all invested cash was held in money market mutual funds.

While investments are not considered by management to be at significant risk, they could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets.

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• Level 3 – Significant unobservable inputs that are generally model-based valuation techniques such as discounted cash flows, based on the best information available, including our own data.

Fair values of our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.

Fair values of

our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.

Merchandise Inventories and Cost of Sales

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The stated value of Merchandise Inventories contained on our Consolidated Balance Sheets also includes freight, certain capitalized overhead costs and reserves.

Factors considered in determining if our inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from our vendors and current and expected future sales trends.

Factors considered in determining if our inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, historical loss rates, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from our vendors and current and expected future sales trends.

We also review aging trends, which include the historical rate at which merchandise has sold below cost and the value and nature of merchandise currently held in inventory and priced below original cost.

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Cost of Sales includes the cost of merchandise sold, buying, distribution, and occupancy costs, inbound freight expense, provision for inventory obsolescence, inventory shrink and credits and allowances from merchandise vendors.

Cost of Sales related to our e-commerce orders includes freight expense for delivering merchandise to our customers.

Cost of Sales related to our e-commerce orders includes shipping expense to deliver merchandise to our customers.

We account for our leases in accordance with Accounting Standards Codification Topic No.

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We evaluate whether a contract is an operating or finance lease at its inception or at its acquisition.

All of our leases are classified as operating leases as of February 3, 2024.

Substantially all of our leases are operating leases as of February 1, 2025, however, as a result of the acquisition of Rogan's, we also acquired certain assets subject to finance leases.

The finance lease assets and related current liabilities and noncurrent liabilities were recorded in Other Noncurrent Assets, Accrued and Other Liabilities and Other long-term liabilities, respectively.

Leases with terms of twelve months or less were not significant and we have elected to expense them as incurred.

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In addition to fixed minimum rental payments set forth in our leases, the measurement of ROU assets and liabilities can also include prepaid rent, landlord incentives (such as construction and tenant improvement allowances), fixed payments related to lease components (such as rent escalation payments scheduled at the lease commencement date), fixed payments related to non-lease components (such as common area maintenance (“CAM”), real estate taxes and insurance) and initial direct costs incurred in conjunction with securing a lease.

The measurement of ROU assets and liabilities excludes amounts related to variable payments related to lease components (such as contingent rent payments based on performance), variable payments related to non-lease components (such as CAM, real estate taxes and insurance) and non-store related leases with an initial term of 12 months or less.

For new leases, renewals or amendments, or when we make material investments in leased properties pursuant to our modernization plan, we make certain estimates and assumptions regarding property values, market rents, property lives, discount rates and probable terms.

For new leases, renewals or amendments, or when we make material investments in leased properties pursuant to our emerging rebanner strategy or modernization plan, we make certain estimates and assumptions regarding property values, market rents, property lives, discount rates and probable terms.

These estimates and assumptions can impact:

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We capitalize these costs based on the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We amortize the costs over the anticipated service contract period for the hosted arrangement.

We amortize the costs over the anticipated service contract period for the hosted arrangement, which is recorded in Selling, General and Administrative Expenses (“SG&A”) .

Long-Lived Asset Impairment Testing

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If the estimated, undiscounted future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value.

Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in Selling, General and Administrative Expenses.

Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in SG&A.

If the operating lease ROU asset is impaired, we would amortize the remaining ROU asset on a straight-line basis over the remaining lease term.

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Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location.

These projections are primarily based on management’s estimates of store-level sales, exercise of future lease renewal options and the store’s contribution to cash flows and, by their nature, include judgments about how

current initiatives will impact future performance.

We estimate the fair value of operating lease ROU assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.

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Goodwill and Intangible Asset Impairment Testing

Goodwill recorded on our Consolidated Balance Sheets resulted from our acquisition of substantially all of the assets and liabilities of Shoe Station, Inc.

("Shoe Station") and is based on a fair value allocation of the purchase price at the time of acquisition.

Goodwill recorded on our Consolidated Balance Sheets resulted from our acquisitions of Shoe Station, Inc.

(“Shoe Station”) and Rogan's and is based on a fair value allocation of the purchase price at the time of the respective acquisitions.

Goodwill is charged to expense only when it is impaired.

We test for Goodwill impairment at the Shoe Station banner level.

This test is performed at least annually and is performed at the beginning of our fiscal fourth quarter.

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We also annually test non-amortizing Intangible Assets for impairment.

Tradenames acquired as part of the Shoe Station acquisition are our primary non-amortizing Intangible Assets.

No impairments were recognized in Fiscal 2023, Fiscal 2022 or Fiscal 2021.

Trade names acquired as part of the Shoe Station and Rogan's acquisitions are our primary non-amortizing Intangible Assets.

No impairments of non-amortizing Intangible Assets were recognized in Fiscal 2024, Fiscal 2023 or Fiscal 2022.

Insurance Reserves

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These estimates take into consideration a number of factors, including historical claims experience, severity factors, statistical trends and, in certain instances, valuation assistance provided by independent third parties.

We record self-insurance expense as a component of Accrued and Other Liabilities in our Consolidated Balance Sheets and in Selling, General and Administrative Expenses in our Consolidated Statements of Income.

We record self-insurance expense as a component of Accrued and Other Liabilities in our Consolidated Balance Sheets and in SG&A in our Consolidated Statements of Income.

While we believe that the recorded amounts are adequate, there can be no assurance that changes to management’s estimates will not occur due to limitations inherent in the estimating process.

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External production costs are expensed in the period the advertisement first takes place.

Advertising expenses included in Selling, General and Administrative Expenses were $ 56.3 million, $ 55.9 million and $ 58.7 million in fiscal years 2023, 2022 and 2021 , respectively.

Advertising expenses included in SG&A were $ 50.5 million, $ 56.3 million and $ 55.9 million in fiscal years 2024, 2023 and 2022 , respectively.

Store Opening and Start-up Costs

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This discount represents the difference between the market price and the employee purchase price.

Stock-based compensation expense is included in Selling, General and Administrative Expenses.

Stock-based compensation expense is included in SG&A.

We account for forfeitures as they occur in calculating stock-based compensation expense for the period.

For performance-based stock awards, we estimate the probability of vesting based on the likelihood that the awards will meet their performance goals.

Segment Information

We are a family footwear retailer that offers a broad assortment of dress, casual and athletic footwear for men, women and children with emphasis on national name brands.

We operate our business as one reportable segment based on the similar nature of products sold;

merchandising, distribution, and marketing processes involved;

target customers;

and economic characteristics of our stores and e-commerce platform.

Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores.

We compute income taxes using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities.

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February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

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In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

The ASU is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The amendments in the ASU will be applied retrospectively to all prior periods presented in the financial statements, using the significant segment expense

categories identified and disclosed in the period of adoption.

We are continuing to evaluate the impact of this new guidance but believe the adoption will not have a material impact on our consolidated financial statements.

The ASU became effective for fiscal years beginning after December 15, 2023.

We adopted ASU 2023-07 for Fiscal 2024 retrospectively to all periods presented in the financial statements.

See Note 6 – ''Segment Reporting'' for additional information.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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We are continuing to evaluate the impact of this new guidance but believe the adoption will not have a material impact on our consolidated financial statements.

Since we adopted ASC 842 in Fiscal 2019, no other accounting guidance adopted has been material to our operations.

Note 3 – Acquisition of Shoe Station

On December 3, 2021, we acquired the physical stores and substantially all of the other assets of Shoe Station for total consideration of $ 70.3 million, net of $ 77,000 of cash acquired.

The purchase price paid was funded with available cash on hand.

As of our Fiscal 2023 year end, we operated 28 stores across six states in the Southeast under the Shoe Station banner, inclusive of the 21 stores acquired and seven additional stores opened since the acquisition.

The addition of a new brand and new retail locations to the Shoe Carnival portfolio has created a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics.

The results of Shoe Station are included in our consolidated financial statements since the acquisition date.

Net Sales attributed to the Shoe Station banner were $ 104.5 million and $ 99.9 million in Fiscal 2023 and Fiscal 2022, respectively, and $ 16.6 million from the acquisition date through January 29, 2022.

Acquisition-related costs of $ 3.2 million were expensed as incurred and are included in Selling, General and Administrative Expenses in our Consolidated Statements of Income in Fiscal 2021.

We are treating Shoe Station trade names as indefinite-lived Intangible Assets;

therefore, Goodwill and the Shoe Station trade names are charged to expense only if impaired.

Goodwill and the indefinite-lived Intangible Assets are expected to be fully deductible for tax purposes over 15 years.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The guidance requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption.

The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted.

We are evaluating the impact of this new guidance but believe the adoption will not have a material impact on our consolidated financial statements.

Note 3 – Acquisition of Rogan Shoes

On February 13, 2 024, we acquired all of the stock of Rogan Shoes, Incorporated, a privately-held 53-year-old work and family footwear company incorporated in Wisconsin, for a purchase price of $ 44.8 million, net of $ 2.2 million of cash acquired, which was paid with cash on hand .

This included $ 378,000 of purchase accounting adjustments which

were paid in November 2024.

Additional consideration of up to $ 5.0 million may be paid by the Company subject to the achievement of three-year growth targets.

At the time of the acquisition, Rogan’s operated 28 store locations in Wisconsin, Minnesota and Illinois.

The Rogan’s acquisition advanced our strategy to be the nation’s leading family footwear retailer.

It immediately positioned us as the market leader in Wisconsin, and it established a store base in Minnesota, creating additional expansion opportunities.

Rogan’s results were included in our consolidated financial statements since the acquisition date.

Net Sales from our Rogan’s operations were $ 80.3 million in Fiscal 2024 .

Acquisition-related costs of $ 570,000 and $ 806,000 were expensed as incurred and were included in SG&A in Fiscal 2024 and Fiscal 2023, respectively.

Supplemental pro forma results of operations reflecting the acquisition are not presented as the impact on our consolidated financial results was not material.

The following table summarizes the purchase price and the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed.

We measured these fair values using Level 3 inputs.

The excess purchase price over the fair value of net assets acquired was allocated to Goodwill.

(In thousands)

Purchase Price:

Cash consideration, net of cash acquired

Fair value of contingent consideration

Total purchase price

Fair value of identifiable assets and liabilities:

Accounts receivable

Merchandise inventories

Operating lease right-of-use assets

Identifiable intangible assets:

Customer relationships

Accounts payable

Operating lease liabilities

Deferred income taxes

Accrued and other liabilities

Total liabilities

Total fair value allocation of purchase price

Our fair value estimate of the Merchandise Inventories for Rogan’s was determined using the Comparative Sales and Replacement Cost methods.

Our fair value estimate related to the identified intangible asset of Rogan’s trade name was determined using the Relief from Royalty method, and the significant assumptions used for the valuation include the royalty rate, estimated projected revenues, long-term growth rate and the discount rate.

Our fair value estimates related to Rogan’s customer relationships were determined using the Multi-Period Excess Earnings method, and the significant assumptions used for the valuation include projected cash flows, the discount rate and customer attrition rate.

Our fair value estimate of the contingent consideration for the Rogan’s acquisition was determined using a Monte Carlo simulation and other methods that account for the probabilities of various outcomes and was recorded in Other long-term liabilities.

Significant assumptions used for the valuation include the discount rate, projected cash flows and calculated volatility.

It will be remeasured on a recurring basis at fair value.

As of February 1, 2025, the fair value of the contingent consideration liability was $ 395,000 , with the resulting $ 3.2 million adjustment recorded as a reduction in SG&A in Fiscal 2024.

Identifiable intangible assets include Rogan’s trade name and customer relationships.

We assigned an indefinite life to Rogan’s trade name;

therefore, Goodwill and Rogan’s trade name will be charged to expense only if impaired.

Customer relationships are subject to amortization and will be amortized over a period of 20 years.

Goodwill and the acquisition-related Intangible Assets are not deductible for tax purposes.

Note 4 – Fair Value of Financial Instruments

The following table presents financial instruments that are measured at fair value on a recurring basis at February 3, 2024 and January 28, 2023:

The following table presents financial instruments that are measured at fair value on a recurring basis at February 1, 2025 and February 3, 2024:

Fair Value Measurements

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deferred compensation

As of January 28, 2023:

As of February 3, 2024:

Cash equivalents – money market mutual funds

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The fair values of Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, Accrued Expenses and Other Current Liabilities approximate their carrying values because of their short-term nature.

The fair value of the Shoe Station and Rogan’s brands were estimated using a relief-from-royalty method.

The estimates and assumptions used in the determination of the fair value of each brand included their respective projected revenue growth, long-term growth rate, the royalty rate and discount rate.

Note 5 – Revenue

Disaggregation of Revenue by Product Category

Revenue is disaggregated by product category below.

Net Sales and percentage of Net Sales for fiscal years 2023, 2022 and 2021 are as follows:

Disaggregation of Net Sales by Product Category

Net Sales and percentage of Net Sales, disaggregated by product category, for fiscal years 2024, 2023 and 2022 were as follows:

(In thousands)

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This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store.

For sales made through our e-commerce platform in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped.

For sales made through our e-commerce sales channel in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped.

This also includes sales made via our Shoes 2U program when the customer chooses home delivery.

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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).

Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at February 3, 2024 and January 28, 2023.

Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at February 1, 2025 or February 3, 2024.

Returns and Refunds

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The estimated cost of Merchandise Inventory is recorded as a reduction to Cost of Sales and an increase in Merchandise Inventories.

At February 3, 2024 , approximately $ 962,000 of refund liabilities and $ 618,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities.

At January 28, 2023 , approximately $ 866,000 of refund liabilities and $ 503,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities.

At February 1, 2025 , approximately $ 1.1 million of refund liabilities and $ 726,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively.

At February 3, 2024 , approximately $ 962,000 of refund liabilities and $ 618,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively.

Contract Liabilities

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We do not record breakage revenue when escheat liability to relevant jurisdictions exists.

At both February 3, 2024 and January 28, 2023 , approximately $ 2.4 million of contract liabilities associated with unredeemed gift cards 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 within two years.

Breakage revenue associated with our gift cards recognized in Net Sales was no t material to any of the periods presented.

At February 1, 2025 and February 3, 2024, $ 2.3 million and $ 2.4 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 year s.

Breakage revenue associated with our gift cards recognized in Net Sales was $ 845,000 in Fiscal 2024, primarily related to Rogan’s as well as increasing breakage rates.

Breakage revenue associated with our gift cards recognized in Net Sales was not material in Fiscal 2023 or Fiscal 2022.

Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards.

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Loyalty awards recognized in Net Sales were $ 3.5 million, $ 6.1 million and $ 5.5 million during fiscal years 2024, 2023 and 2022, respectively.

At February 3, 2024 and January 28, 2023 , approximately $ 481,000 and $ 844,000 of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities, respectively.

At February 1, 2025 and February 3, 2024 , approximately $ 564,000 and $ 481,000 of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities, respectively.

We expect the revenu e associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.

Note 6 – Segment Reporting

Shoe Carnival, Inc.

has a single operating and reportable segment that sells footwear and related merchandise for the family across our retail banners and sales channels.

With respect to our omnichannel strategy, our e-commerce sales channel is integrated with our Shoe Carnival, Shoe Station and Rogan’s physical store locations across 36 states and Puerto Rico and is fundamentally inseparable in how we serve our target customers.

Our chief operating decision maker (“CODM”) is our President and Chief Executive Officer .

The CODM assesses performance and decides how to allocate resources based on Net Income that also is reported on the income statement as our consolidated Net Income.

The CODM uses Net Income to evaluate performance in deciding whether to reinvest

profits, facilitate acquisitions or return funds to shareholders through dividends or share repurchases.

Net Income is used to monitor budget versus actual results and in competitive analysis by benchmarking to our peers and competitors.

The benchmarking analysis and the monitoring of budgeted versus actual results are used in assessing our performance and in establishing management’s compensation.

We have concluded that, on the basis of the principles in ASC 280, the expenses below require disclosure under the significant expense principle.

The CODM does not review assets in evaluating results.

Therefore, such information is not provided.

Operating financial results of our segment for fiscal years 2024, 2023 and 2022 are as follows:

(In thousands)

Merchandise & delivery costs (1)

Store occupancy costs

Store expenses (2)

E-commerce expenses (3)

Store depreciation and other selling expenses (4)

General and administrative expenses (5)

Other segment items (6)

Interest income

Interest expense

Income tax expense

(1) Merchandise & delivery costs include the cost of merchandise and other buying and distribution costs.

(2) Store expenses include selling expenses generally controlled operationally at the store level, such as store level payroll.

(3) E-commerce expenses include primarily website maintenance costs and other selling expenses.

(4) See Note 7 – Property and Equipment for more information.

Other selling expenses include store-related health care, other insurance, licensing/tax costs and Property and Equipment write-offs.

(5) General and administrative expenses include departmental and corporate expenses, including incentive and share-based compensation and merger and integration expenses.

(6) Other segment items represent non-operating income resulting from pandemic-related tax credits associated with our acquisition of Rogan's in February 2024.

Note 7 – Property and Equipment

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Total depreciation expense associated with Property and Equipment was $ 28.3 million in Fiscal 2024 , $ 25.8 million in Fiscal 2023 and $ 20.9 million in Fiscal 2022.

As of February 3, 2024 and January 28, 2023 , there was approximately $ 15.5 million and $ 13.3 million, respectively, of construction work in process included in Property and Equipment, primarily related to store remodel and new store construction activity.

No impairment charges on long-lived assets held and used were recorded in Fiscal 2023 or in Fiscal 2022 and in Fiscal 2021 , we recorded impairment charges of $ 1.3 million on long-lived assets held and used.

Impairment charges are included in Selling, General and Administrative Expenses in our Consolidated Statements of Income.

As of February 1, 2025 and February 3, 2024 , there was $ 11.4 million and $ 15.5 million, respectively, of construction work in process included in Property and Equipment, primarily related to store rebanners/remodels and new store construction activity.

No impairment charges on long-lived assets held and used were recorded in Fiscal 2024, Fiscal 2023 or Fiscal 2022 .

Impairment charges would be included in SG&A in our Consolidated Statements of Income.

Note 8 – Cloud Computing Arrangements that are Service Contracts

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These platforms are cloud computing arrangements that are software-as-a-service (“SaaS”) contracts.

Net capitalized costs related to cloud computing arrangements as of February 3, 2024 and January 28, 2023 were $ 15.9 million and $ 16.7 million, respectively.

Net capitalized costs related to cloud computing arrangements as of February 1, 2025 and February 3, 2024 were $ 14.4 million and $ 15.9 million, respectively.

Total amortization expense related to these arrangements was $ 2.7 million during Fiscal 2024, $ 3.0 million during Fiscal 2023 and $ 2.3 million during Fiscal 2022.

As of February 3, 2024 , approximately $ 3.4 million of net capitalized costs related to cloud computing arrangements were classified in Other Current Assets and $ 12.5 million were classified as Other Noncurrent Assets in our Consolidated Balance Sheets.

As of January 28, 2023 , approximately $ 3.0 million of net capitalized costs related to cloud computin g arrangements were classified in Other Current Assets and $ 13.7 million were classified as Other Noncurrent Assets in our Consolidated Balance Sheets.

Note 8 – Accrued and Other Liabilities

As of February 1, 2025 , $ 3.2 million of net capitalized costs related to cloud computing arrangements were classified in Other Current Assets and $ 11.2 million were classified as Other Noncurrent Assets in our Consolidated Balance Sheets.

As of February 3, 2024 , $ 3.4 million of net capitalized costs related to cloud computin g arrangements were classified in Other Current Assets and $ 12.5 million were classified as Other Noncurrent Assets in our Consolidated Balance Sheets.

Note 9 – Other Consolidated Balance Sheets and Consolidated Statements of Income Information

Accrued and Other Liabilities consisted of the following:

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Employee compensation and benefits

Current portion of non-qualified deferred compensation

Sales and use tax

Self-insurance reserves

Current portion of non-qualified deferred compensation

Total accrued and other liabilities

Interest and Other Income consisted of the following:

(In thousands)

Interest income

Other non-operating income

Interest and other income

Note 10 – Debt

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The terms “net worth”, “consolidated interest coverage ratio”, “consolidated funded indebtedness”, “consolidated rental expense”, “consolidated EBITDA”, “base rate” and “Adjusted Term SOFR” are defined in the Credit Agreement.

No borrowings were outstanding under the Credit Agreement as of February 3, 2024 and January 28, 2023 and we did no t borrow under either of the credit agreements during Fiscal 2023 or Fiscal 2022.

As of February 3, 2024 , there were $ 700,000 in letters of credit outstanding and $ 99.3 million available to us for borrowing under the Credit Agreement.

No borrowings were outstanding under the Credit Agreement as of February 1, 2025 or February 3, 2024 , and we did no t borrow under the Credit Agreement during Fiscal 2024 or Fiscal 2023.

As of February 1, 2025 , there were $ 1.0 million in letters of credit outstanding and $ 99.0 million available to us for borrowing under the Credit Agreement.

Note 11 – Leases

We lease all of our physical stores, our Evansville distribution center, which has a current lease term expiring in 2034 , and office space for our Southern office.

We also enter into leases of equipment, copiers and billboards.

W e do not have any leases with related parties.

In addition, we do not have any sublease arrangements with any related party or third party.

We lease all of our physical stores, our Evansville distribution center, which has a current lease term expiring in 2034 , and other warehousing and office space.

We also enter into leases of equipment and other assets.

Substantially all of our leases are operating leases;

however, as a result of the acquisition of Rogan’s, we also acquired certain assets subject to finance leases.

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 or any sublease arrangements with any related party or third party as of February 1, 2025.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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Certain real estate leases also contain escalation clauses for increases in minimum rentals, operating costs and taxes.

Lease-related costs reported in our Consolidated Statements of Income were as follows:

Lease costs , including other related occupancy costs, reported in our Consolidated Statements of Income were as follows:

(In thousands)

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Percentage rent and other variable lease costs

Finance lease cost

Amortization of leased assets

Interest on lease liabilities

Other information related to leases, including supplemental cash flow information, consists of:

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February 1, 2025

January 28, 2023

February 3, 2024

January 28, 2023

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Weighted-average discount rate for operating leases

1) Includes ROU assets added as part of the Shoe Station acquisition described in Note 3 - "Acquisition of Shoe Station"

1) Includes ROU assets added as part of the Rogan's acquisition described in Note 3 – “Acquisition of Rogan Shoes”

The following table reconciles the undiscounted cash flows for each of the next five years and the total of the remaining years to our operating lease liabilities as of February 1, 2025:

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Total deferred tax liabilities

Net long-term liability

We have tax credit carryforwards associated with our Puerto Rico operations totaling $ 3.3 million at February 3, 2024 and $ 2.6 million at January 28, 2023.

These credits expire at various times over the next ten years .

We have taken a

full valuation allowance against these credits given they are not expected to be utilized due to the current differential between U.S.

Net deferred tax liability

We have tax credit carryforwards associated with our Puerto Rico operations totaling $ 3.6 million at February 1, 2025 and $ 3.3 million at February 3, 2024.

These credits expire at various times over the next nine years .

We have taken

a full valuation allowance against these credits given they are not expected to be utilized due to the current differential between U.S.

and Puerto Rico tax rates.

As of February 3, 2024 and January 28, 2023 , there were no unrecognized tax liabilities or related accrued penalties or interest.

As of February 1, 2025 and February 3, 2024 , there were no unrecognized tax liabilities or related accrued penalties or interest.

Note 13 – Employee Benefit Plans

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This plan is similar to our Domestic Savings Plan, whereby an employee may contribute up to 20 % of his or her annual earnings, with a matching Company contribution up to the first 4 % at a rate of 50 %.

Contributions charged to expense associated with these plans were $ 1.0 million, $ 1.0 million and $ 949,000 in fiscal years 2023, 2022 and 2021, respectively.

Contributions charged to expense associated with these plans were $ 1.1 million, $ 1.0 million and $ 1.0 million in fiscal years 2024, 2023 and 2022, respectively.

Deferred Compensation Plan

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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.

Changes in these Marketable Securities and deferred compensation plan liabilities are charged to Selling, General and Administrative Expenses.

Changes in these Marketable Securities and deferred compensation plan liabilities are charged to SG&A.

The following tables present the balances and activity of the Company's deferred compensation plan liabilities and related Marketable Securities:

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Net deferred compensation expense

(1) We began investing in these Marketable Securities to fund the deferred compensation plan in July 2021, thus Fiscal 2021 has a full year of activity for deferred compensation liabilities and Marketable Securities earnings and loss only in the last seven months of Fiscal 2021.

(2) Included in the mark-to-market gains, in Fiscal 2023, we recognized unrealized gains of $ 1.4 million related to equity securities still held at February 3, 2024.

Included in the mark-to-market losses, in Fiscal 2022 and Fiscal 2021, we recognized unrealized losses of $ 833,000 and $ 2.0 million related to equity securities still held at January 28, 2023 and January 29, 2022, respectively.

(1) Included in the mark-to-market gains in Fiscal 2024 and Fiscal 2023, we recognized unrealized gains of $ 1.0 million and $ 1.4 million related to equity securities still held at February 1, 2025 and February 3, 2024, respectively.

Included in the mark-to-market losses in Fiscal 2022, we recognized unrealized losses of $ 833,000 related to equity securities still held at January 28, 2023.

Note 14 – Stock-Based Compensation

On June 20, 2023, our shareholders approved an amendment and restatement of the Shoe Carnival, Inc.

2017 Equity Incentive Plan (as amended and restated, the “2017 Plan”).

Pursuant to the amendment and restatement, the number of shares of our common stock available for issuance under the 2017 Equity Plan was increased by an additional 1,800,000 shares, the term of the 2017 Equity Plan was extended an additional ten years from the date of shareholder approval, and certain other design changes were made to the plan.

2017 Equity Incentive Plan (as amended and restated, the “2017 Equity Plan”).

Pursuant to the amendment and restatement, the number of shares of our common stock available for issuance under the 2017 Equity Plan was increased by an additional 1.8 million shares, the term of the 2017 Equity Plan was extended an additional ten years from the date of shareholder approval, and certain other design changes were made to the plan.

Stock-based compensation includes share-settled awards issued pursuant to our 2017 Equity Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards.

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Diluted Net Income per Share below the threshold level of performance results in complete forfeiture of the award.

Any performance stock units granted in Fiscal 2023 and Fiscal 2022 that are earned based on our actual performance vest in full on March 31, 2026 and March 31, 2025, respectively.

None of the performance stock units granted in Fiscal 2023 were earned.

Any performance stock units granted in Fiscal 2024 that are earned based on our actual performance vest in full on March 31, 2027.

The performance stock units granted in Fiscal 2022 that were earned based on our actual performance vest in full on March 31, 2025.

Other vesting scenarios have been used in prior years and for awards used to incentivize specific employee performance.

Our service-based restricted stock units and restricted stock awards vest under different scenarios based on the year they were granted, as determined and approved by our Board of Directors.

The restricted stock units granted in Fiscal 2023 and Fiscal 2022 vest one-third after two years and two-thirds after three years.

For our non-employee Board

members and Vice Chairman, all restricted stock awards are issued to vest on January 2 nd of the year following the year of the grant.

The restricted stock units granted in Fiscal 2024 vest one-half after two years and the remaining half after three years.

Restricted stock units granted in Fiscal

2023 and Fiscal 2022 vest one-third after two years and two-thirds after three years.

For our non-employee Board members and Vice Chairman, all restricted stock awards are issued to vest on January 2 nd of the year following the year of the grant.

Awards that contain both performance and service-based conditions require that the performance target be met during the required service period.

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The following table summarizes transactions for our restricted stock units and performance stock units:

Outstanding at January 28, 2023

Outstanding at February 3, 2024

Outstanding at February 1, 2025

The total fair value at grant date of restricted stock units and performance stock units that vested during Fiscal 2024, Fiscal 2023 and Fiscal 2022 was $ 1.4 million, $ 4.8 million and $ 3.3 million, respectively.

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The following table summarizes transactions for our restricted stock and other stock awards:

Outstanding at January 28, 2023

Outstanding at February 3, 2024

The total fair value at grant date of restricted stock and other stock awards that vested during Fiscal 2023, Fiscal 2022 and Fiscal 2021 was $ 0.5 million , $ 0.5 million and $ 0.3 million, respectively.

Outstanding at February 1, 2025

The total fair value at grant date of restricted stock and other stock awards that vested during each of Fiscal 2024, Fiscal 2023 and Fiscal 2022 was $ 0.5 million .

The weighted-average grant date fair value of restricted stock and other stock awards granted during Fiscal 2023 and Fiscal 2022 was $ 21.90 and $ 24.12 , respectively.

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Each SAR entitles holders, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined.

The SARs granted during the first quarter of Fiscal 2021 vested and became fully exercisable on March 31, 2022 and any unexercised SARs will expire on March 31, 2024.

The SARs issued in Fiscal 2021 have a defined maximum gain of $ 5.00 over the exercise price of $ 30.94 .

The SARs granted during the first quarter of Fiscal 2021 vested and became fully exercisable on March 31, 2022 and any unexercised SARs expired on March 31, 2024.

The SARs issued in Fiscal 2021 had a defined maximum gain of $ 5.00 over the exercise price of $ 30.94 .

The following table summarizes SARs activity:

Outstanding at January 28, 2023

Outstanding at February 3, 2024

The fair value of these liability awards is remeasured, using a trinomial lattice model, at each reporting period until the date of settlement.

Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards.

The weighted-average fair value of outstanding SAR awards as of February 3, 2024 , was $ 0.29 .

The fair value was estimated using a trinomial lattice model with the following assumptions:

Risk free interest rate yield curve

3.99 %- 5.49 %

3.62 %- 4.68 %

Expected dividend yield

Expected volatility

Exercise multiple

Maximum payout

Employee exit rate

2.2 % - 9.0 %

The risk-free interest rate was based on the U.S.

Treasury yield curve in effect at the end of the reporting period.

The expected dividend yield was based on our quarterly cash dividends, with the assumption that quarterly dividends would continue at that rate.

Expected volatility was based on the historical volatility of our common stock.

The exercise multiple and employee exit rate were based on historical data.

Outstanding at February 1, 2025

The fair value of these liability awards were remeasured, using a trinomial lattice model, at each reporting period until the date of settlement.

Increases or decreases in stock-based compensation expense were recognized over the vesting period, or immediately for vested awards.

Stock Purchase Plan

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The 2025 Share Repurchase Program replaced a $ 50 million share repurchase program that was authorized in December 2023, became effective January 1, 2024 and expired in accordance with its terms on December 31, 2024 .

Shares totaling 230,696 were repurchased during Fiscal 2023 at a cost of $ 5.4 million.

Shares totaling 1,134,524 were repurchased during Fiscal 2022 at a cost of $ 30.5 million and shares totaling 208,662 were repurchased at a cost of $ 7.1 million in Fiscal 2021.

No shares were repurchased during Fiscal 2024.

Shares totaling 230,696 were repurchased during Fiscal 2023 at a cost of $ 5.4 million and shares totaling 1,134,524 were repurchased during Fiscal 2022 at a cost of $ 30.5 million.

See Note 10 – “Debt” for a discussion of our Credit Agreement and its restrictions regarding share repurchases.

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(“Skechers”) and Crocs, Inc.

("Crocs") collectively accounted for approximately 45 % of our Net Sales in Fiscal 2023.

Nike and Skechers collectively accounted for approximately 27 % in Fiscal 2022 and 39 % in Fiscal 2021.

Nike accounted for approximately 20 % in Fiscal 2023, 14 % in Fiscal 2022 and 28 % in Fiscal 2021.

Skechers accounted for approximately 14 % in Fiscal 2023, 13 % in Fiscal 2022 and 11 % in Fiscal 2021.

Crocs accounted for approximately 11 % in Fiscal 2023.

(“Crocs”), collectively accounted for approximately 48 % of our Net Sales in Fiscal 2024 and 45 % of our Net Sales in Fiscal 2023.

Nike accounted for approximately 24 % of our Net Sales in Fiscal 2024, 20 % in Fiscal 2023 and 14 % in Fiscal 2022;

Skechers accounted for approximately 13 % of our Net Sales in Fiscal 2024, 14 % in Fiscal 2023 and 13 % in Fiscal 2022;

and Crocs accounted for approximately 11 % of our Net Sales in both Fiscal 2024 and Fiscal 2023.

A loss of any of our key suppliers in certain product categories could have a material adverse effect on our business.

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See Note 10 – “Debt” for a discussion of our Credit Agreement and its restrictions regarding dividend payments and acquisitions.

Rogan's Acquisition

On February 13, 2024, we acquired Rogan Shoes, Incorporated (“Rogan’s”), a privately-held, family-owned shoe retailer.

Rogan’s was acquired for an initial purchase price of $ 45 million.

This initial consideration, funded entirely from cash on hand, is subject to customary adjustments, and additional consideration of up to $ 5 million may be paid by the Company subject to the achievement of three-year performance targets.

With this acquisition, we will own and operate Rogan’s 28 store locations, which are located in Wisconsin, Minnesota, and Illinois.

CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 7. Management’s Discussion and Analysis