SHOE STATION GROUP INC 10-K

ITEM 1. BUSINESS Our Company Shoe Carnival, Inc. is one of the nation’s largest omnichannel sellers of footwear for the family, and our goal is to be the leading family footwear retailer in the United States. We operate a retail focused business model that aims to deliver the leading footwear shopping experience with the national name brands desired by our customers. Our “bricks” first, omnichannel approach provides customers easy access to our wide assortment of branded footwear for athletics, daily activities and special events via their choice of delivery channel. We have a proven track record selling branded footwear, such as Nike, Skechers, Crocs, adidas, Puma, HEYDUDE, Converse and Vans, and generating profits without incurring debt. We have been in business for 46 years and have been a public company subject to SEC reporting requirements since 1993. Since 1993, we have earned a profit in every year except 1995. As part of our long-term growth strategy, we have invested, and will continue to invest, significantly in acquisitions, our emerging rebanner strategy, our customer relationship management (“CRM”) capabilities, our e-commerce infrastructure and modernization of our store fleet as key drivers of profitable growth. As of our Fiscal 2024 year end, we operated 430 stores across 36 states and Puerto Rico. Including e-commerce sales in close proximity to a physical store, our comparable physical stores generated an average of $2.8 million in Net Sales in Fiscal 2024 and approximately $246 in Net Sales per square foot. Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. 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 2021 is the fiscal year ended January 29, 2022, Fiscal 2020 is the fiscal year ended January 30, 2021 and Fiscal 2019 is the fiscal year ended February 1, 2020. Fiscal 2023 consisted of 53 weeks while all other years presented and discussed consisted of 52 weeks. References to “Shoe Carnival,” “Shoe Station” and “Rogan’s” are to the individual store sets, not the entire company. References to “we,” “us,” “our” and the “Company” in this Annual Report on Form 10-K refer to Shoe Carnival, Inc. and its subsidiaries. Shoe Carnival, Inc. is an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to the “SEC” refer to the United States Securities and Exchange Commission. See PART II, ITEM 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K for more information regarding the trends impacting our Fiscal 2024 operating results. Our Stores Shoe Carnival Our Shoe Carnival retail concept has developed over our 46-year history and is differentiated from competitors by our distinctive, fun and promotional marketing efforts. Shoe Carnival stores combine competitive pricing with a high-energy in-store environment that encourages customer participation. Unique features of our store experience include upbeat music, opportunities for customers to spin our spin-n-win wheel and a mic-person who runs in-store specials. These specials include contests, games and hot deals of the moment to encourage customers to take immediate advantage of our special, in-store pricing. As of our Fiscal 2024 year end, we operated 360 Shoe Carnival stores located across 35 states and Puerto Rico and offered online shopping at www.shoecarnival.com. Net Sales from our Shoe Carnival banner declined mid-single digits in Fiscal 2024 compared to Fiscal 2023. This decline was in line with our view of family footwear industry trends. Shoe Station In Fiscal 2021, we acquired our first 21 Shoe Station stores. Our Shoe Station concept targets a more affluent footwear customer and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands 4 that meet the needs of the target customer. Our Shoe Station bannered stores’ Net Sales grew mid-single digits in Fiscal 2024 compared to Fiscal 2023, driven by new store growth and a low-single digit comparable stores Net Sales increase, outpacing our view of family footwear industry trends. As of our Fiscal 2024 year end, we operated 42 Shoe Station bannered stores across seven states in the Southeast, inclusive of the 21 stores acquired in 2021, 11 additional stores opened since the acquisition and ten stores rebannered in Fiscal 2024, as described below, and offered online shopping at www.shoestation.com. Rogan’s In February 2024, we acquired Rogan Shoes, Incorporated (“Rogan’s”). The Rogan's acquisition immediately positioned us as the family footwear market leader in Wisconsin and established a store base in Minnesota, creating additional expansion opportunities. Net Sales attributed to Rogan's were $80.3 million in Fiscal 2024, consistent with our expectations, and Operating Income attributed to Rogan’s in Fiscal 2024 exceeded our $10 million target by more than 20%. As of our Fiscal 2024 year end, we operated the 28 Rogan’s stores we acquired, which are located in Wisconsin, Illinois and Minnesota. More information about the Rogan’s 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. Rebanner Strategy We have been evaluating customer analytics and market data and developing strategies to expand Shoe Station since we acquired the chain in December 2021. For the past two fiscal years, Shoe Station has been a market leader in the Southeast, and, according to industry data, Shoe Station has been the industry’s fastest growing retailer. During the same period, our Shoe Carnival banner and the family footwear industry experienced comparable stores Net Sales declines. We believe that a national expansion opportunity exists in markets where the customer and/or market characteristics align better with our 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. We expect the long-term prospects of this strategy will result in significant market share growth in areas where we have underperformed with our Shoe Carnival concept. We also expect to enter new markets where we do not compete today as a future phase of the expansion plan. The Shoe Station rebanner strategy is expected to create significant financial leverage from a more productive store base. During Fiscal 2025, we expect to rebanner between 50 to 75 Shoe Carnival stores to Shoe Station stores. The Fiscal 2025 investment for the rebanners is forecasted to decrease Fiscal 2025 Operating Income by between $20 to $25 million, inclusive of 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. We expect that this Fiscal 2025 investment will be recovered over a two-to-three-year period following a store’s grand opening. In Fiscal 2027, our expectation is that Net Sales from these rebannered stores will be over 10% higher and profit contribution will increase over 20% compared to the stores before they were rebannered. In Fiscal 2026 and early Fiscal 2027, we plan to scale up further and complete 100 or more rebanners, with a first-year investment forecast of between approximately $22 to $27 million and a similar path to payback of the investment of approximately two-to-three years. 5 Our Diversified Sales Mix We sell broadly across the family footwear channel, with balanced distribution among type of customer (men, women and children), product (athletics and non-athletics) and age (senior citizens to infants) and with no singular reliance on any particular segment. The products we offer are a broad mix of footwear for sport, daily activities and special events. The table below sets forth our percentage of sales by product category over the last five fiscal years. Fiscal Years 2024 2023 2022 2021 2020 Non-Athletics: Women's 25 % 26 % 28 % 24 % 22 % Men's 18 16 17 14 14 Children's 7 7 7 6 5 Total 50 49 52 44 41 Athletics: Women's 15 15 14 16 18 Men's 17 17 16 20 22 Children's 12 13 12 14 13 Total 44 45 42 50 53 Accessories 5 5 5 5 5 Other 1 1 1 1 1 Total 100 % 100 % 100 % 100 % 100 % Other Initiatives Store Growth and Modernization In Fiscal 2024, we opened four new Shoe Station branded stores, permanently closed two Shoe Carnival branded stores and acquired 28 Rogan’s stores. Increasing market penetration by adding new stores is a key component of our long-term growth strategy. In the near-term, however, we expect new store openings may continue to be impacted by macroeconomic uncertainty, our ability to identify desirable locations, increased focus on our emerging rebanner strategy and focus on our acquisition strategy. In Fiscal 2023 and Fiscal 2022, our capital expenditures were $56.3 million and $77.3 million, respectively, with a primary focus on store modernization and new stores. Our modernized store design has been viewed as a differentiator by certain strategic vendor partners and has provided us an opportunity to increase access to branded merchandise. Total capital expenditures were $33.2 million in Fiscal 2024 and lower than prior years as our store modernization program was completed. E-commerce Growth Our e-commerce platform is an extension of our physical stores and is designed to improve our customer’s shopping experience. We are committed to providing a personalized, seamless customer experience across all channels, and we believe that our ongoing omnichannel initiatives are aligned with changing consumer behavior. We delivered a new online experience to our customers in Fiscal 2023. We launched our www.shoestation.com website in February 2023 and relaunched our www.shoecarnival.com website in late October 2023. This marked the first major redesign of our Shoe Carnival website since 2016. We have completed the technology migration for both banners to a single platform hosted by a leading provider. We continue to expect our e-commerce platform, which operates both our Shoe Carnival and Shoe Station websites, to be a significant sales channel for us. Our goal is for our e-commerce sales channel to provide between 10% and 15% of enterprise-wide merchandise sales, versus a pre-pandemic 6% in Fiscal 2019. E-commerce sales represented approximately 10% of our merchandise sales in each of Fiscal 2024, Fiscal 2023 and Fiscal 2022. 6 Customer Relationship Management (“CRM”) Our CRM program continues to provide valuable customer insights to our business, resulting in more efficient and effective marketing outreach. Our CRM program provides our marketing, merchandising, analytics and real estate teams with a better and more complete view of our customer’s shopping behaviors and forms the foundation of our digital marketing efforts and our Shoe Perks loyalty program (“Shoe Perks”). Our view into customer data allows us to more effectively communicate with our customers on a segmented basis through all owned and paid media channels and tailor the merchandise mix at an individual store level. Through transaction data, we gain useful insights into our customers’ shopping habits, including where, when and how they shop our stores and navigate our online presence. Additionally, our CRM program allows us to gain a deeper understanding of the brands and categories that our high-value customers consistently purchase so that we can continue to meet customer needs and demand at a geographic and store level. Our CRM program allows us to drive customer retention by delivering to each customer more individualized shopping opportunities and experiences and aids in gaining a better understanding of our existing customer base as well as identifying new customers. We expect segmentation and activation of our high-value customers through data analysis and targeting the broader market of ‘look-a-like’ customers to continue to play a key role in our growth. Once a customer enrolls in Shoe Perks and provides a means for digital communication, the customer will begin receiving personalized communications from us. These communications afford us additional opportunities to highlight our broad product assortment and promotional programs. Shoe Perks provides customers with a heightened shopping experience, which includes exclusive offers and rewards that are earned by making purchases either in-store or online and through participating in other point earning opportunities that facilitate engagement with our brand and the national name brands we offer. We are focused on expanding our Shoe Perks enrollment. In Fiscal 2024, our Shoe Perks membership, including Shoe Station and Rogan's customers, grew to 36.8 million members, representing an increase in customers of 7% compared to Fiscal 2023 year end. In Fiscal 2024, purchases from Shoe Perks members were approximately 73% of our comparable stores Net Sales. We believe our Shoe Perks program provides an opportunity to communicate, build relationships and engage with our most loyal shoppers and increase our customer touch points, which we believe will result in long-term sales gains. Our most loyal customers, those who qualify for our “Gold” tier, receive additional rewards and incentives. The average transaction value for our Gold tier customers was significantly higher than non-Gold tier Shoe Perks members in Fiscal 2024. Strong and Diversified Vendor Partnerships We offer merchandise from a broad range of over 270 vendor partners. Nike, Inc. (“Nike”), Skechers U.S.A., Inc. (“Skechers”) and Crocs, Inc. (“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. We continually work to strengthen our brand offerings and our relationships with our key vendors. While we have no long-term contracts in place with any of our vendors, we anticipate that Nike, Skechers and Crocs will continue to be high-volume vendors for us in Fiscal 2025. Our Competitive Strengths We believe our operational and financial success is due to a number of key competitive strengths that make our stores destinations of choice for our family channel footwear consumer. 7 Digital Media to Build Brand Awareness Our goal is to communicate a consistent brand image across all aspects of our operations and throughout our marketing strategies. We highlight our banners and the name brands we carry, including specific styles of product, using lifestyle and product imagery to showcase merchandise brands. The use of digital media comprises the substantial portion of our marketing investment, particularly as we leverage data that comes directly from our customers as part of our CRM solution, allowing us to directly communicate with our core customers. Television, radio, print media (including inserts, direct mail and newspaper advertising) and outdoor advertising accounted for the balance of our total advertising investment. Centralized Distribution Process Our Evansville distribution center is equipped with mechanized processing and product movement equipment. The facility utilizes cross docking/store replenishment and redistribution methods to fill store product requirements. These methods may include count verification, price and bar code labeling of each unit (when not performed by the manufacturer), redistribution of an order into size assortments (when not performed by the manufacturer) and allocation of shipments to individual stores. Throughout packing, allocating, storing and shipping, our distribution process is essentially paperless. Merchandise is typically shipped to each store location once per week. For stores within the continental United States, a dedicated carrier, with occasional use of common carriers, handles the majority of shipments. We leverage these investments with third-party managed software tailored to our specific needs to track merchandise during the transportation and distribution process. During Fiscal 2024, over 90% of merchandise was received into our Evansville distribution center, with a much smaller percentage of merchandise being directly drop shipped to customers, sent directly to a store location or received into Rogan’s distribution process. Effective beginning in February 2025, inbound shipments for the Rogan’s locations acquired in Fiscal 2024 were integrated into our centralized buying and distribution process. Additional information about our Evansville distribution center can be found in PART I, ITEM 2, “Properties” of this Annual Report on Form 10-K. Disciplined Approach to Capital Management We remain focused on funding our normal operations without debt. We ended Fiscal 2024 with no debt and $123.1 million of Cash and Cash Equivalents and Marketable Securities. Over the last five fiscal years, we have had no debt outstanding and Cash, Cash Equivalents and Marketable Securities of $62 million to $132 million at the end of each fiscal year. We believe this approach increases our ability to make impactful, long-term decisions and enhances our stakeholder relationships. Leased Stores Our stores are found in high traffic shopping areas and are generally located in open-air shopping centers. On average, our physical stores are approximately 11,400 square feet and carry inventory of approximately 28,000 pairs of shoes per location. More information about our store locations and other properties can be found in PART I, ITEM 2, “Properties” of this Annual Report on Form 10-K. All stores are currently leased and more information on our leases can be found in Note 11 - “Leases” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K. Distinctive In-Store Shopping Experience Our in-store merchandise is displayed directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose. Our trained staff is dedicated to customer service and assists and educates customers with the features and location of merchandise, as well as finding sizes, styles and colors. Our new store design incorporates the use of digital screens that are centrally controlled and are more adaptable than printed visual in-store advertising. These digital screens further enhance the in-store shopping experience and provide another opportunity for our vendors to compete for in-store advertising. Broad Merchandise Assortment Our product assortment is comprised primarily of on-trend branded footwear for the entire family and includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes. Our physical stores carry shoes in two 8 general categories – athletics and non-athletics with subcategories for men's, women's and children's shoes, as well as a broad range of accessories. Our e-commerce platform offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and colors that may not be available in all stores. There are differences in merchandise between our store banners, and, to some extent, there is further differentiation by store under each banner, reflecting each store’s unique demographics and customer preferences. Our knowledge of these customer preferences, combined with our vendor relationships and distribution process, allows us to react to emerging trends or special events. Information Technology Our proprietary inventory management and advanced point-of-sale (“POS”) systems provide us with the timely information necessary to monitor and control all phases of operations. The POS provides, in addition to other features, full price management, promotion tracking capabilities (in support of the spontaneous nature of the in-store price promotions), real-time sales and cost of sales by product category at the store level and customer tracking. Using the POS, both store personnel and centralized merchandising staff are able to monitor sales, cost of sales and the success of product promotions in real-time. Our systems provide up-to-date sales and inventory information, and our data warehouse enables our merchandising and store operations staff to analyze sales, margin and inventory levels by store. Using this information, our merchandise managers meet regularly with vendors to compare product sales and margins and return on inventory investment against previously stated objectives. We believe timely access to key business data has enabled us to manage our promotional intensity and positively impact our comparable stores Net Sales and inventory turns. Efficient E-commerce Order Management and Fulfillment (Ship-From-Store and Vendor Drop Ship Program) We have implemented a third-party hosted order management system designed to our specific needs, which has enabled us to meet the complex demands of omnichannel fulfillment and has positioned us to further scale our e-commerce capabilities as we grow. Our Ship-From-Store program is a core element of our omnichannel strategy. Online orders are primarily fulfilled using physical stores. By fulfilling e-commerce orders principally from our store level inventory and staff, we are able to minimize out-of-stocks, offer our customers an expanded online assortment and leverage store level inventory and overhead. E-commerce orders can also be fulfilled from our distribution center in Evansville, Indiana, and this distribution center is used in times of peak demand. We also maintain a vendor drop-ship program with select business partners. This program offers our customers an expanded online assortment of styles and colors that we do not carry in store. While our customers benefit from expanded item assortment, the functionality of this program is seamless, and our customers’ online experience is not impacted by the vendor drop-ship fulfillment option. As a benefit of this program, we do not need to make a capital investment in the expanded inventory assortment, which is carried and fulfilled by our business partners participating in this program. Competitive Pricing For Our Customers Our Shoe Carnival customer is primarily a value-conscious consumer seeking name brand footwear across all ages, with our Shoe Station and Rogan’s concepts targeting a higher price point and more affluent customer. We believe that by offering a wide selection of popular styles of primarily name brand merchandise at competitive prices, we generate broad customer appeal. Additionally, the time-conscious customer appreciates the convenience of one-stop shopping for the entire family, whether this occurs at our store locations or through our other omnichannel choices. Competition The retail footwear business is highly competitive. We believe the principal competitive factors in our industry are merchandise selection, price, fashion, quality, location, shopping environment and service. We compete with department stores, shoe stores, sporting goods stores, e-commerce retailers and mass merchandisers. We compete with most department stores and traditional shoe stores by offering competitive prices. We compete with off-price retailers, mass merchandisers and discount stores by offering a wider and deeper selection of merchandise. Many of 9 our competitors are significantly larger than we are in terms of Net Sales, and many can access the capital markets with greater speed and efficiency than we can. Culture and Human Capital Management We have intentionally built an employee-centric, customer-focused organization designed to compete at the highest levels in the retail industry. Our commitment to, and investment in, a strong performance culture is paramount to our long-term sustainability and success. Our Workforce We are firmly committed to providing equal opportunities in all aspects of employment and believe that all individuals should be treated with respect and dignity. We are dedicated to attracting, developing, maintaining and supporting an inclusive workforce that includes individuals with a wide range of backgrounds, life experiences and cultures. We believe that these varied experiences enhance our connection with our diverse customer base and enable us to better serve our customers. We hire, promote and compensate our employees based on merit, experience or other work-related criteria. We do not tolerate harassment or unlawful discrimination. Mandatory annual training for all employees empowers our workforce and instills these virtues into our culture. We have clear policies encouraging strong relationships and protecting open lines of communication with management at every level. This, coupled with our non-retaliation policy, encourages employees to communicate issues and seek immediate redress of those issues if they should arise. As of our Fiscal 2024 year end, our workforce identified as 63% female and 37% male. Our broad-based leadership team, including those who manage and lead our stores and those who lead our Company, identified as 60% female and 40% male. With respect to ethnicity, our leadership team identified as 64% Caucasian and 36% non-Caucasian. Retention We believe our employee-centric culture not only supports higher levels of execution and performance, but also has led to increased retention of key talent. Our store-level training programs provide the foundation for long-term careers and our ability to promote from within. We support the first-time jobs for many of our associates where they gain workforce experiences that may grow into long-term careers. Currently, nearly all of our general managers and nearly all of our district managers who oversee those general managers were trained, developed and promoted from within. As of our Fiscal 2024 year end, of our 37 district managers, 68% have been employed by us for more than 20 years. The average tenure of our general managers was 14 years as of Fiscal 2024 year end. Individuals who comprise our leadership team, which includes our named executive officers, vice presidents and senior director-level employees, have been employed for an average of 18 years. Annually we survey a cross-section of employees on matters involving policy and procedure, organizational structure, operating style, commitment to hiring a competent workforce and commitment to integrity and ethical values. Since 2004, responses to this survey have had an average score of 4.0 to 4.3, with 5 being “strongly agree.” Employee Benefits Among the many ways we seek to serve our employees, we offer a complete range of benefits. These include competitive wages and incentives; an employee stock purchase plan with a discount off the fair value of our common 10 stock; employer-subsidized medical plans with dental and vision benefits; qualified and unqualified defined contribution plans with employer matching contributions; and merchandise discounts, among other benefits. Training and Code of Business Conduct and Ethics We are dedicated to strengthening our culture and execution through ongoing training for all associates. We are uniquely focused on training within our store-level, customer-facing operations. Employees must obtain necessary certifications in order to be responsible for the keys to a store and eventually to become a general manager. Our broad-based training program also engages and educates our employees on the following key topics: • Code of Business Conduct and Ethics (“Code of Ethics”); • Insider trading; • Non-discrimination and anti-harassment; • Cybersecurity awareness and responsibility; and • Supply chain security. More information regarding our approach to conducting business responsibly, including our guidelines on discrimination and harassment, can be found in our Code of Ethics. Our Code of Ethics applies to all of our Board members, officers and employees, including our principal executive officer and our principal financial and accounting officer. Our Code of Ethics is posted on the investor relations portion of our website at investors.shoecarnival.com/governance/governance-documents. We intend to disclose any amendments to the Code of Ethics by posting such amendments on our website. In addition, any waivers of the Code of Ethics for our Board members or executive officers will be disclosed in a Current Report on Form 8-K. Safety of our Employees and Security of our Data We strive to provide our associates with a safe and healthy work environment. We measure OSHA recordable incidents to gauge the success of our safety protocol. During calendar year 2024, we recorded 45 non COVID-related OSHA recordable incidents, an approximate 25% reduction in incidents compared to five years ago. Our strategies to address the ever-expanding complexities of protecting customer and employee data and executing our business strategies in an increasingly digital world continue to advance. Our technology department monitors and regularly tests compliance with our protocols, provides regular updates to employees and management and conducts annual training. More information on our cybersecurity processes can be found in PART I, ITEM 1C, “Cybersecurity” of this Annual Report on Form 10-K. Number of Employees As of our Fiscal 2024 year end, we had approximately 5,500 employees, of which approximately 3,000 were employed on a part-time basis. The number of employees fluctuates during the year primarily due to seasonality. None of our employees are represented by a labor union. Seasonality For a discussion of the impact of seasonality on our operating results and our business, see PART II, ITEM 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Impact of Store Count and Seasonality on Quarterly Results.” Trademarks As of our Fiscal 2024 year end, we own the following federally registered trademarks and service marks: Shoe Carnival ® and associated trade dress and related logos, Y-NOT? ® , UNR8ED ® , Solanz ® , Shoe Perks ® , SC Work Wear ® , Shoes 2U ® , Laces for Learning ® , UNBOX WHAT’S POSSIBLE ® , Shoe Station ® , Shoe Station Super Store ® , Shoe 11 Station Select ® and Rogan’s Shoes ® . We believe these marks are valuable and, accordingly, we intend to maintain the marks and the related registrations. We are not aware of any pending claims of infringement or other challenges to our right to use these marks. Environmental We seek to minimize our impact on the environment by actively implementing environmentally-friendly processes throughout our business, including energy efficiency initiatives, waste minimization and the use of recycled materials within our supply chain. Our most significant areas of focus are fuel and packaging material used to deliver merchandise to our Evansville distribution center and stores; the HVAC and lighting systems in our stores, Evansville distribution center and corporate offices; and recycling methods. Compliance with current federal, state and local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material effect upon our capital expenditures, earnings or competitive position. We anticipate no material capital expenditures for environmental control facilities for Fiscal 2025 or for the near future. Available Information We make available free of charge through the investor relations portion of our website at www.shoecarnival.com our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We have included our website addresses throughout this filing as textual references only. The information contained on, or accessible through, any of our websites is not incorporated into this Annual Report on Form 10-K. This Annual Report on Form 10-K filed with the SEC, including the financial statements and schedules thereto, without the accompanying exhibits, is available without charge to shareholders, investment professionals and securities analysts upon written request. Requests should be directed to Investor Relations at our corporate address. A list of exhibits is included in this Annual Report on Form 10-K, and exhibits are available from us upon payment to us of the cost of furnishing them. Information about our Executive Officers The following table sets forth certain information with respect to our executive officers as of the date of filing this Annual Report on Form 10-K, March 21, 2025: Name Age Position J. Wayne Weaver 90 Chairman of the Board and Director Clifton E. Sifford 71 Vice Chairman of the Board and Director Mark J. Worden 51 President and Chief Executive Officer and Director Carl N. Scibetta 66 Senior Executive Vice President - Chief Merchandising Officer Marc A. Chilton 55 Senior Executive Vice President - Chief Operating Officer Patrick C. Edwards 53 Senior Vice President, Chief Financial Officer, Treasurer and Secretary Mr. Weaver has served as Chairman of the Board since March 1988. From 1978 until February 1993, Mr. Weaver had served as President and Chief Executive Officer of Nine West Group Inc., a designer, developer and marketer of women’s footwear. He has over 50 years of experience in the footwear industry. Mr. Weaver is a former Director of Nine West Group Inc. Mr. Weaver served as Chairman and Chief Executive Officer of Jacksonville Jaguars, LTD, a professional football franchise, until January 2012. Mr. Sifford has served as Vice Chairman of the Board since October 2021. From September 2019 to September 2021, Mr. Sifford served as Vice Chairman of the Board and Chief Executive Officer. Mr. Sifford also served as President and Chief Executive Officer from October 2012 to September 2019 and has been a Director since October 2012. Mr. 12 Sifford served as Chief Merchandising Officer from October 2012 to March 2016. From June 2001 to October 2012, Mr. Sifford served as Executive Vice President – General Merchandise Manager and from April 1997 to June 2001, Mr. Sifford served as Senior Vice President – General Merchandise Manager. Prior to joining us, Mr. Sifford served as Merchandise Manager – Shoes for Belk, Inc. Mr. Worden has been employed as President and Chief Executive Officer and a Director of the Company since October 2021. From September 2019 to September 2021, Mr. Worden served as President and Chief Customer Officer and from September 2018 to September 2019, Mr. Worden served as Executive Vice President – Chief Strategy and Marketing Officer. Prior to joining the Company, Mr. Worden led the Northern European region for S. C. Johnson & Son, Inc. (“SC Johnson”), a manufacturer of household cleaning supplies and products, and was responsible for revenue and share growth objectives across six countries from May 2014 to July 2018. Prior to that, Mr. Worden served as Assistant to the Chairman and Chief Executive Officer of SC Johnson from May 2012 to May 2014 and as a Senior Marketing Director from 2009 to 2012. Mr. Worden also served as a Senior Brand Manager at Kimberly-Clark Corporation and held multiple marketing roles across its flagship brands during his tenure there from 2003 through 2009. Mr. Scibetta has been employed as Senior Executive Vice President – Chief Merchandising Officer since March 2021. From March 2016 to March 2021, Mr. Scibetta served as Executive Vice President – Chief Merchandising Officer. From December 2012 to March 2016, Mr. Scibetta served as General Merchandise Manager. Prior to joining us, Mr. Scibetta served as Vice President, Divisional Merchandise Manager– Footwear for Belk, Inc. since 2008. From 2004 to 2007, Mr. Scibetta served as Vice President, Divisional Merchandise Manager – Footwear for Parisian Department Stores. From 1998 to 2000, Mr. Scibetta served as Vice President, Divisional Merchandise Manager for Shoe Corporation of America. Mr. Scibetta began his retail career with Wohl Shoe Company in 1980. Mr. Scibetta will be retiring from the Company, effective April 4, 2025. Mr. Chilton has been employed as Senior Executive Vice President – Chief Operating Officer since February 20, 2025. From February 2023 to February 20, 2025, Mr. Chilton served as our Executive Vice President – Chief Operating Officer. From April 2021 to February 2023, Mr. Chilton served as our Executive Vice President – Chief Retail Operations Officer. From February 2020 to April 2021, Mr. Chilton served as our Senior Vice President – Store Administration and Development and from March 2019 to February 2020 served as our Senior Vice President – Store Operations and Administration. Mr. Chilton started with the Company in 1994 as a store manager and has served in roles of increasing responsibility in store management and operations since that time, including serving as the Vice President of our Northern Division, with approximately one-third of our stores reporting to him, from April 2012 until March 2019. Mr. Edwards has been employed as Senior Vice President, Chief Financial Officer and Treasurer since September 2023. He has also served as our Secretary since June 2021 and served as our Assistant Secretary from December 2019 to June 2021. Mr. Edwards served as our Vice President and Corporate Controller from October 2019 until September 2023 and was appointed an executive officer in March 2021 as our Chief Accounting Officer, serving in that role until September 2023. Prior to joining us, Mr. Edwards was Vice President of Accounting for CenterPoint Energy, Inc., a publicly traded utility company, from February 2019 to August 2019 following its acquisition of Vectren Corporation (“Vectren”), also a publicly traded utility company. For Vectren, Mr. Edwards held various leadership roles in the accounting, audit and finance functions from February 2001 through February 2019, including Vice President and Treasurer from April 2017 to February 2019 and Vice President of Corporate Audit from August 2013 to April 2017. Prior to joining Vectren, Mr. Edwards worked in public accounting. Mr. Edwards is a Certified Public Accountant. Our executive officers serve at the discretion of the Board of Directors. There is no family relationship between any of our Directors or executive officers. Effective on April 6, 2025, Tanya E. Gordon will succeed Mr. Scibetta as our Executive Vice President – Chief Merchandising Officer. Ms. Gordon, age 60, has served as our Senior Vice President – General Merchandising Manager since March 2021. From March 2020 to March 2021, Ms. Gordon served as our Vice President – General Merchandising Manager and from March 2014 to March 2020, Ms. Gordon served as our Vice President – Divisional Merchandising Manager. In these roles of increasing responsibility, Ms. Gordon was primarily responsible for our women’s, children’s and accessories merchandise. Prior to joining the Company, Ms. Gordon gained merchandising experience at retailers Kohl’s and Parisian, among others. 13 ITEM 1A. R isk Factors Carefully consider the following risk factors and all other information contained in this Annual Report on Form 10-K before making an investment decision with respect to our common stock. Investing in our common stock involves a high degree of risk. If any of the following risks actually occur, we may not be able to conduct our business as currently planned and our financial condition and operating results could be materially and adversely affected. See PART I, “Cautionary Statement Regarding Forward-Looking Information” at the beginning of this Annual Report on Form 10-K. Our risk factors are categorized as follows: Operational and Strategic Risks, Compliance and Litigation Risks, Human Capital Risks, Financial and Liquidity Risks and Risks Relating to the Ownership of Our Common Stock. Operational and Strategic Risks A failure to increase sales at our existing stores may adversely affect our stock price and affect our results of operations. A number of factors have historically affected, and will continue to affect, our comparable stores Net Sales results, including: • competition; • timing of holidays, including sales tax holidays; • general regional and national economic conditions, including inflation; • inclement weather and/or unseasonable weather patterns; • consumer trends, including the impact of higher prices on consumer goods; • the impact of and government response to pandemics; • fashion trends; • changes in our merchandise mix; • our ability to efficiently distribute merchandise; • timing and type of, and customer response to, sales events, promotional activities or other advertising; • the effectiveness of our inventory management; • new merchandise introductions; and • our ability to execute our business strategy effectively. Our comparable stores Net Sales results have fluctuated in the past, and in recent years, our Shoe Carnival banner comparable stores Net sales have declined, and we believe such fluctuations or declines may continue. The unpredictability of our comparable stores Net Sales may cause our revenue and results of operations to vary from quarter to quarter and year to year, and declines in Net Sales or Operating Income may cause our stock price to fluctuate significantly. We may not realize the expected operating results from, and planned growth of, our Shoe Station banner, including planned growth from our rebanner strategy. We have rebannered and are planning to continue to rebanner Shoe Carnival stores to Shoe Station stores where market data indicates the Shoe Station concept may perform better. A significant portion of our growth strategy is based on growing our Shoe Station banner through rebannering stores into Shoe Station stores, acquisitions and organic growth. Our ability to achieve our strategies will depend, in part, on our ability to realize the expected operating results from, and planned growth of, our Shoe Station banner, which we may not realize within our expected time frames, or at all. The Shoe Station banner may underperform relative to our expectations. In addition, the costs incurred to achieve these results may be greater than what we anticipate. Any of these impacts could have an adverse effect on our growth, business, results of operations and financial condition. We face significant competition in our markets, and we may be unable to compete favorably. The retail footwear industry is highly competitive with few barriers to entry. We compete primarily with department stores, shoe stores, 14 sporting goods stores, e-commerce retailers and mass merchandisers. Many of our competitors are significantly larger and have substantially greater resources than we do. Since Fiscal 2019, our Gross Profit margin has expanded and has been a key driver to the overall increase in our profitability. If our competitors become more promotional than we are, or if we match our competitors’ promotional intensity, and lower margins are not offset with increased sales or lower operating expenses, our results of operations and financial condition may be adversely affected. Adverse impacts on consumer spending may significantly harm our business and impact our promotional strategies and intensity. The success of our business depends to a significant extent upon the level of consumer spending. Consumer confidence is hypersensitive to a wide variety of influences that may affect the level of consumer spending on merchandise that we offer, including, among other factors: • military conflicts, including war, terrorism, civil unrest, other hostilities and security concerns; • inflation; • the timing and level of government stimulus payments; • energy costs, which affect gasoline and home heating prices; • general economic and industry conditions and recessionary fears; • unemployment trends and salaries and wage rates; • the level of consumer debt; • consumer credit availability; • real estate values and foreclosure rates; • consumer confidence in future economic conditions, including macroeconomic and political uncertainty and instability; • interest rates; • health care costs; • tax rates, policies and timing and amounts of tax refunds; and • natural disasters, changing weather patterns and catastrophic events, including the possibility of a pandemic resurgence. Any adverse change in these factors could result in a decrease in consumer demand for our merchandise. Reduced consumer demand could result in reduced traffic in our physical stores and to our e-commerce platform, increased selling and promotional expenses and inventory markdowns, and could cause us to close underperforming stores, which could result in higher than anticipated closing costs. Reduced demand may result in higher than normal inventory positions across our competitive landscape and may limit the prices we can charge for our merchandise and force us to adjust our promotional intensity. Any of these factors, including becoming more promotional, could have an adverse effect on our business, results of operations and financial condition. Failure to successfully manage and execute our marketing and pricing strategies could have a negative impact on our business . Our success and growth are partially dependent on generating customer traffic in order to gain sales momentum in our physical stores and drive traffic to our e-commerce platform. Effective use of CRM data and successful marketing efforts are necessary for us to reach customers through their desired mode of communication. Our inability to accurately predict our customers’ preferences, to utilize their desired mode of communication, or to ensure availability of advertised products at effective price points could adversely affect our business and results of operations. An increase in the cost, or a disruption in the flow, of imported goods may decrease our sales and profits. We rely on imported merchandise to sell in our stores. Substantially all of our footwear product is manufactured overseas, including the merchandise we purchase from domestic vendors and the smaller portion we import directly from overseas manufacturers. Our primary footwear manufacturers are located in China. Any disruption in the supply 15 chain may increase the cost of the goods we purchase, limit our ability to acquire merchandise and decrease our sales and profits. If imported merchandise becomes more expensive or unavailable, the transition to alternative sources may not occur in time to meet our demands. Products from alternative sources may be of lesser quality and more expensive than those we currently import. Other risks associated with our use of imported goods include: • disruptions in the flow of imported goods because of factors such as electricity or raw material shortages, work stoppages, strikes, political unrest, war, pandemics and natural disasters; • changes in the political and economic environments in, the status of trade relations with, and the impact of changes in trade policies and tariffs impacting, China and other countries which are the major manufacturers of footwear; • tariffs, import duties, import quotas, anti-dumping duties and other trade sanctions; • modifications to international trade policy and/or existing trade agreements and other changes affecting United States trade relations with other countries; • problems with oceanic shipping, including shipping container shortages and piracy; • port congestion at arrival ports causing delays; • additional oceanic shipping costs to reach non-congested ports; • inland transit costs and delays resulting from port congestion; • economic crises and international disputes; • currency exchange rate fluctuations; • increases in the cost of purchasing or shipping foreign merchandise resulting from the failure to maintain normal trade relations with source countries; • increases in shipping rates imposed by the trans-Pacific shipping cartel; and • our non-compliance with the laws and regulations, and changes to such laws and regulations, in the United States and the countries where our manufacturers are located, including but not limited to requirements relating to shipping security, product safety testing, environmental requirements and anti-corruption laws. Our failure to identify fashion trends could result in lower sales, higher markdowns and lower gross profits. Our success depends upon our ability to anticipate and react to the fashion tastes of our customers and provide merchandise that satisfies consumer demand. Our failure to anticipate, identify or react appropriately to changes in consumer fashion preferences may result in lower sales, higher markdowns to reduce excess inventories and lower gross profits. Conversely, if we fail to anticipate or react to consumer demand for our products, we may experience inventory shortages, which would result in lost sales and could negatively affect our customer goodwill, our brand image and our profitability. Moreover, our business relies on continuous changes in fashion preferences. Stagnating consumer preferences could also result in lower sales and would require us to take higher markdowns to reduce excess inventories. Our failure to effectively manage our real estate portfolio may negatively impact our results of operations. Effective management of our real estate portfolio is critical to our omnichannel strategy. All of our stores are subject to leases and are primarily located in open-air shopping centers. If we fail to effectively implement our real estate strategies or negotiate appropriate lease terms or if unforeseen changes arise, the consequences could have an adverse effect on our profitability, cash flows and liquidity. The financial impact of exiting a leased location can vary greatly depending on, among other factors, the terms of the lease, the condition of the local real estate market, demand for the specific property and our relationship with the landlord, and influencing these factors is difficult. In addition to rent, we could still be responsible for the maintenance, taxes, insurance and common area maintenance (“CAM”) charges for vacant properties until the lease commitment expires or is terminated. We locate our stores primarily in open-air shopping centers where we believe our customers and potential customers shop. The success of an individual store can depend on favorable placement within a given open-air shopping center 16 and the volume of traffic generated by the other destination retailers and the anchor stores in the open-air shopping centers where our stores are located. We cannot control the development of alternative shopping destinations near our existing stores or the availability or cost of real estate within existing or new shopping destinations. If one or more of the destination retailers or anchor stores located in the open-air shopping centers where our stores are located close or leave, or if there is significant deterioration of the surrounding areas in which our stores are located, our business may be adversely affected. In addition, if our store locations fail to attract sufficient customer traffic or we are unable to locate replacement locations on terms acceptable to us, our business could suffer. Various risks associated with our e-commerce platform may adversely affect our business and results of operations. E-commerce has been an important sales channel for us. We sell shoes and related accessories through websites that we control, including www.shoecarnival.com and www.shoestation.com and through our related mobile app. We fulfill substantially all e-commerce orders from our store locations and from our Evansville distribution center. If we are unable to continue to grow our e-commerce sales or effectively manage the impact that rebannering our stores might have on our e-commerce sales channel, our sales, comparable stores Net Sales and Gross Profit may decline, and our stock price may decrease, any of which could negatively impact our results of operations, cash flows and financial condition. Our e-commerce operations are subject to numerous other risks that could have an impact on our results of operations, including: • unanticipated operating problems; • reliance on third-party computer hardware, software and service providers; • the need to continually invest in technology and security; • our ability to hire, retain and train personnel to conduct our e-commerce operations; • diversion of sales from our physical stores; • our ability to manage any upgrades or other technological changes; • our ability to provide customer-facing technology systems, including mobile technology solutions, that function reliably and provide a convenient and consistent experience for our customers; • exposure to potential liability for online content; • risks related to the failure of the computer systems that operate our e-commerce platform and the related support systems, including computer viruses, telecommunication failures and cyberattacks and break-ins and similar disruptions; and • security risks related to our electronic processing and transmission of confidential customer information. Any significant interruptions in the operations of our third-party providers, over which we have no control, could have an adverse effect on our e-commerce operations. Any breach involving our customer information could harm our reputation or result in liability including, but not limited to, fines, penalties and costs of litigation, any of which could have an adverse effect on our operating results, financial condition and cash flows. Members in our Shoe Perks customer loyalty program account for a significant portion of our sales, and any material decline in sales from our Shoe Perks members could have an adverse impact on our results of operations. We believe our Shoe Perks rewards program provides our customers with a heightened shopping experience, which includes exclusive offers and personalized messaging. Rewards are earned by making purchases and participating in other point earning opportunities that facilitate engagement with our brand. We remain focused on expanding our Shoe Perks enrollment. In Fiscal 2024, purchases from Shoe Perks members were approximately 73% of our comparable stores Net Sales. If our Shoe Perks members do not continue to shop with us, our sales may be adversely affected, which could have an adverse impact on our results of operations. We may not be able to successfully execute our growth strategy, which could have an adverse effect on our business, financial condition and results of operations. Our growth strategy requires that we continue to invest in omnichannel initiatives, which requires substantial investment in technology, to expand and improve our operating and financial systems and expand, train and manage our employee base. In addition, as we create more opportunities to connect 17 with our customers through our omnichannel initiatives and as we grow the number of our physical stores, we may be unable to hire a sufficient number of qualified personnel or successfully integrate the omnichannel initiatives or new or acquired stores into our business. If we fail to successfully implement our growth strategy, our business, financial condition or results of operations could be adversely affected. The success of our growth strategy will depend on a number of other factors, some of which are out of our control, including, among other things: • the acceptance of our banners and concepts in new markets, including as a result of our rebanner strategy; • our ability to provide adequate distribution to support growth; • our ability to source sufficient levels of inventory; • our ability to resolve downtime or technical issues related to our e-commerce platform, our order management and fulfillment systems and all other related systems that support our omnichannel strategy; • our ability to execute omnichannel advertising and marketing campaigns to effectively communicate our message to our customers and our employees; • our ability to locate suitable store sites and negotiate store leases (for new stores and renewals) on favorable terms; • particularly if we expand into new markets, our ability to open a sufficient number of new stores to provide the critical mass needed for efficient advertising and effective brand recognition; • the availability of financing for capital expenditures and working capital requirements; • our ability to improve costs and timing associated with opening new stores; and • the impact of new stores on sales or profitability of existing stores in the same market. We depend on our key suppliers for merchandise and advertising support and the loss of any of our key suppliers could adversely affect our business. Our business depends upon our ability to purchase fashionable, name brand and other merchandise at competitive prices from our suppliers. Three branded suppliers, Nike, Inc., Skechers U.S.A., Inc. and Crocs, Inc., collectively accounted for approximately 48% of our Net Sales in Fiscal 2024 and 45% of our Net Sales in Fiscal 2023. Nike, Inc. and Skechers U.S.A., Inc. collectively accounted for approximately 27% of our Net Sales in Fiscal 2022. Name brand suppliers also provide us with cooperative advertising and visual merchandising funds. Certain key suppliers’ business models are changing and such changes include, but are not limited to, increased direct-to-consumer initiatives, changes in planned product allocations and reductions in the number of retailers with which they are choosing to do business. A loss of any of our key suppliers in certain product categories or our inability to obtain name brand or other merchandise from suppliers at competitive prices could have an adverse effect on our business. As is common in the industry, we do not have any long‑term contracts with our suppliers. We may experience difficulties in integrating Rogan’s and realizing the expected operating results, synergies, growth opportunities and other benefits of the acquisition. The success of the Rogan’s acquisition will depend, in part, on our ability to realize growth opportunities and achieve other benefits from acquiring Rogan’s. We may not realize further synergies, maintain the synergies gained to date or maintain the operating results realized in Fiscal 2024 from the Rogan’s business, or grow those results in future periods, as Rogan’s may underperform relative to our expectations. Any of these impacts could have an adverse effect on our growth opportunities, business, results of operations and financial condition. We may not be able to identify or consummate future acquisitions or achieve expected benefits from or effectively integrate future acquisitions. From time to time, we expect to evaluate selective acquisitions and strategic investments. Future acquisitions involve many risks that could have an adverse effect on our business, results of operations or financial condition, including: • our ability to identify suitable acquisition candidates, prevail against competing potential acquirers and negotiate and consummate acquisitions on terms attractive to us; • any acquired business not achieving anticipated revenues, earnings, cash flow or market share; 18 • the potential loss of key employees, vendors or suppliers of the acquired company or adverse effects on our existing relationships with our vendors and suppliers; • the failure of our due diligence procedures to detect material issues related to the acquired business, including exposure to legal claims for activities of the acquired business prior to the acquisition; • unexpected liabilities resulting from the acquisition for which we may not be adequately indemnified; • the integration of the personnel, operations, logistics, information technologies, communications, purchasing, accounting, marketing, administration and other systems and the establishment of internal controls into the acquired company’s operations; • the diversion of management attention and financial resources from our current operations; • the potential incurrence of debt to fund an acquisition; • any unforeseen management and operational difficulties; and • incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges and write-offs of significant amounts of goodwill or other assets that could adversely affect our financial results. Our inability to achieve the anticipated benefits of any future acquisitions and other investments could adversely affect our business, results of operations and financial condition. Natural disasters, public health crises, political crises and other catastrophic events or other events outside of our control may damage our facilities or the facilities of third parties on which we depend and could impact our supply chain and access to customers. Our facilities, including our Evansville distribution center, our corporate headquarters and other offices and our retail stores, and the facilities of our third-party vendors and service providers could suffer if affected by: • natural disasters, such as fires, earthquakes, explosions, hurricanes, power shortages or outages, floods, monsoons, ice storms or tornadoes; • public health crises such as pandemics and epidemics; • political crises such as terrorism, war, political instability, civil unrest or other conflict; or • other events outside of our control. We currently operate a primary distribution center located in Evansville, Indiana. Virtually all merchandise received by our physical stores is, and will be, shipped through this distribution center. A disaster occurring at this distribution center would be significant and we could be unable to effectively deliver merchandise to our stores for an extended period. Disasters occurring at our distribution center located in Evansville, Indiana, our corporate headquarters and other offices, our retail stores or the infrastructure of a key third-party vendor or service provider also could impact our reputation and our customers’ perception of our brand. In the event of a severe disruption resulting from such events, we have contingency plans and employ crisis management to respond and recover operations. Despite these measures, if such an occurrence were to occur, our results of operations and financial condition could be adversely affected. We could be adversely affected if our information technology systems fail to operate effectively, are disrupted or are compromised. We rely on our information technology systems in operating and monitoring major aspects of our business, including sales, warehousing, distribution, purchasing, inventory control, merchandise planning and replenishment, point-of-sale support and financial systems. We regularly make investments to upgrade, enhance or replace our systems as well as leverage new technologies to support our operational strategies. Any delays or difficulties with such projects could have an adverse effect on our operational results, financial position and cash flows. The reliability and capacity of our information technology systems, and in particular our distribution technology operations, are critical to our continued operations. We currently operate a primary distribution center in Evansville, Indiana. Virtually all merchandise received by our physical stores is, and will be, shipped through this distribution center. We fulfill substantially all of our e-commerce orders from our store locations and our primary distribution 19 center. Given that we have one primary distribution center, virtually any technology disruption there could be significant to our operations. Our corporate computer network is essential to our distribution process. Despite our precautionary efforts, our information technology systems are vulnerable from time to time to damage or interruption from, among other things, natural or man-made disasters, technical malfunctions, inadequate systems capacity, power outages, terrorist attacks, computer viruses and security breaches, which may require significant investment to fix or replace. If our primary distribution center is shut down for any reason, if our information technology systems do not operate effectively or if we are the target of attacks or security breaches, we may suffer the loss of critical data, we could incur significantly higher costs and longer lead times associated with distributing our products to our stores, our ability to operate our e-commerce platform may be impacted and we could experience other interruptions or delays to our operations, which could have an adverse effect on our operating and financial performance. We outsource certain business processes to third-party vendors and have certain business relationships that subject us to risks, including disruptions to our business and increased costs. We rely on third-party suppliers for our merchandise and outsource some of our business processes to third-party vendors. Our relationships with these business partners expose us to risks, including disruptions in our business and increased costs. In addition, other matters involving our business partners could have an adverse effect on our business and financial results. These include, but are not limited to: • changes in the public’s perception of the reputation and brand of the business partner as a result of matters such as its labor and wage standards, business practices or marketing campaigns; • our inability to properly manage a business partner relationship; • any data losses or information security lapses by a business partner that results in the compromise of personal information or the improper use or disclosure of sensitive information; and • any misconduct by a business partner involving matters such as fraud or other improper or unethical activities conducted by the business partner or its non-compliance with our policies and procedures or with laws and regulations, including laws and regulations regarding the use and safeguarding of information, labor practices, environmental, health or safety matters and lobbying or similar activities. Failure of our business partners to provide adequate services or our inability to arrange for alternative providers on favorable terms in a timely manner could disrupt our business, increase our costs or otherwise adversely affect our business and our financial results. Failure to maintain positive brand perception and recognition could have a negative impact on our business. Maintaining a good reputation is critical to our business. In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites and other forms of internet-based communications that provide access to a broad audience of consumers and other persons. The popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination. If we are unable to quickly and effectively respond to the dissemination of negative information about us via social media or any other incidents negatively impacting our reputation and brand, we may suffer declines in customer loyalty and traffic and we may experience vendor relationship issues and other issues, regardless of the information’s accuracy, all of which could negatively affect our financial results. In addition, we frequently use social media to communicate with customers and the public in general. Failure to use social media effectively could negatively impact our brand value and revenues. Emerging technologies may create disruption to the retail industry. New and emerging technology may enable new approaches or choices for how our customers procure goods and services and pay for those goods and services. We may be unable to quickly adapt to rapid change resulting from artificial intelligence, blockchain, Internet of Things, including voice and smart home devices, and other advanced technologies that may result in changes to our supply chain, distribution channels and point-of-sale capabilities. Our quarterly operating results can fluctuate due to seasonality, weather conditions and other factors. Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a 20 result of seasonal variances, weather conditions and the timing of sales and costs associated with opening new stores and closing existing stores. We have three distinct peak selling periods: Easter, back-to-school and Christmas. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year. Reductions in demand for our merchandise during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our Net Sales and margins and negatively affect our profitability. Our operating results depend significantly upon the sales generated during these periods, and our quarterly results may be impacted by calendar shifts of holiday or seasonal periods. We also increase our inventory levels to offer styles particularly suited for the relevant season, such as sandals in the early summer season and boots during the winter season. If the weather conditions for a particular season vary significantly from those typical for such season, such as an unusually cold early summer or an unusually warm winter, consumer demand for the seasonally appropriate merchandise that we have available in our stores has been in the past, and in the future could be, adversely affected and negatively impact Net Sales and margins. Lower demand for seasonally appropriate merchandise may leave us with an excess inventory of our seasonally appropriate products, forcing us to sell these products at significantly discounted prices and adversely affecting our Net Sales, margins and operating cash flow. Conversely, if weather conditions permit us to sell our seasonal product early in the season, this may reduce inventory levels needed to meet our customers’ needs later in that same season. Consequently, our results of operations are highly dependent on somewhat predictable weather conditions and our ability to react to changes in weather conditions. Other factors that may affect our quarterly results of operations include: • fashion trends; • the timing and amount of income tax refunds to customers; • the effectiveness of our inventory management; • changes in general economic conditions, including inflation and consumer spending patterns; and • actions of competitors or co-tenants. If our future quarterly results fail to meet the expectations of research analysts, then the market price of our common stock could decline substantially. We are exposed to physical and financial risks related to the uncertainty of climate change. A changing climate creates uncertainty and could result in broad changes, both physical and financial in nature, to our retail, distribution and corporate locations. These impacts could include, but are not limited to: • population shifts; • changes in the level of annual rainfall; • changes in the overall average temperature; and • changes to the frequency and severity of weather events such as hurricanes and other wind related events, thunderstorms, tornadoes and ice storms that can damage our facilities and impact our supply chain and distribution channels. Such changes could impact us in a number of ways including limiting available real estate; changing the demographics of our customer base and employees; increasing the likelihood of capital expenditures to replace damaged infrastructure; and increasing the cost of insurance. Compliance and Litigation Risks Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigation and damage our reputation. We receive and maintain certain personal, sensitive and 21 confidential information about our customers, vendors and employees. The collection and use of this information are regulated and are subject to certain contractual restrictions in third-party contracts. Non-compliance with these regulations and contractual restrictions may subject us to fines, penalties, restrictions and expulsion from credit card acceptance programs and civil liability. Although we have implemented processes to collect and protect the integrity and security of this personal information, there can be no assurance that this information will not be obtained by unauthorized persons, or collected or used inappropriately, including as a result of cybersecurity breaches, acts of vandalism, computer viruses, credit card fraud or phishing. Advanced cybersecurity threats are persistent and continue to evolve, making them increasingly difficult to identify and prevent. If our security and information systems or the systems of our employees or external business partners are compromised or our employees or external business partners fail to comply with these laws and regulations and this information is obtained by unauthorized persons, or collected or used inappropriately, our reputation, as well as our operations and financial results, could be negatively affected and litigation or regulatory action against us or the imposition of costs, fines or other penalties could also occur. As privacy and information security laws and regulations change, we may incur additional costs to remain in compliance. We may not have adequate insurance coverage for all potential liabilities. Natural risks, as well as other hazards associated with our operations, can result in personal injury, severe damage or destruction to our owned assets, leasehold improvements and inventory, suspension of our operations, and cybersecurity breaches. Our insurance covers costs relating to specified, limited matters, such as events involving casualty losses and property losses due to fire and windstorms, as well as securities litigation and certain cybersecurity incidents, but does not cover other events such as acts of war or terrorist attacks. We maintain an amount of insurance protection we believe is appropriate, but there can be no assurance that the amount of insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject. A claim for which we are not adequately insured could have an adverse effect on our financial condition. Further, due to the cyclical nature and current hardening of the insurance markets, we cannot provide assurance that insurance coverage will continue to be available on terms similar to those presently in place. We are subject to periodic litigation and other regulatory proceedings, which could result in the unexpected expenditure of time and resources. We are a defendant from time to time in lawsuits and regulatory actions relating to our business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of such proceedings. An unfavorable outcome could have an adverse effect on our business, financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and will require us to devote substantial resources and executive time to defend, thereby diverting management’s attention and resources that are needed to successfully run our business. Human Capital Risks Our failure to manage key executive succession and retention could adversely affect our business. Our business would be adversely affected if we fail to retain key executives, or to adequately plan for the succession of members of our executive management team. While we have succession plans in place for members of our executive management team, and continue to review and update those plans, and we have employment agreements with certain key executive officers, these plans and agreements do not guarantee that the services of our executive officers will continue to be available to us or that we will be able to find suitable management personnel to replace departing executives on a timely basis. Our failure to attract and retain qualified personnel and control labor costs could adversely affect our business. Our business model requires us to train, motivate and manage our employees and to attract, motivate and retain additional qualified managerial and merchandising personnel. Our ability to control costs and meet our labor needs in a rising wage and inflationary environment is subject to external factors such as unemployment levels, prevailing wage rates paid by those with whom we compete for talent, health care and minimum wage legislation, and changing demographics. If we are unable to attract and retain quality sales associates and management, embrace automation, such as robot, artificial intelligence, and self-checkout technology, as necessary, or if market conditions or changes to minimum wage laws result in the need for higher wages paid to employees, our ability to meet our growth goals or to sustain expected levels of profitability may be compromised and our financial condition, results of operations and cash flows may be adversely affected. 22 Financial and Liquidity Risks We will require significant funds to implement our business strategy and meet our other liquidity needs. We may not generate sufficient cash flow from operations or obtain sufficient borrowings under our credit agreement to finance our business strategy and meet our other liquidity needs. Failure to generate or raise sufficient funds may require us to modify, delay or abandon some of our future growth or expenditure plans. We may utilize our credit agreement to fund working capital, including inventory purchases, and special purpose standby letters of credit, as needed. Significant decreases in cash flow from operations could result in our borrowing under the credit agreement to fund operational needs. If we borrow funds under our credit agreement and interest rates materially increase, our financial results could be adversely affected. Financial market volatility could have an adverse effect on the sources and costs of financing available to us. The capital and credit markets have experienced, and may continue to experience, volatility and disruption, which could, among other impacts, make obtaining other sources of debt more difficult and increase our borrowing costs or limit other potential sources of financing available to us. If our long-lived assets become impaired, we may need to record significant non-cash impairment charges. Periodically, we review our long-lived assets for impairment whenever economic events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, and certain intangible assets, such as goodwill and non-amortizing trade names, are evaluated annually regardless of triggering events. Significant negative industry or general economic trends, disruptions to our business and unexpected significant changes or planned changes in our use of the assets (such as store relocations or closures) have resulted, and in the future may result, in impairment charges. Any such impairment charges, if significant, would adversely affect our financial position and results of operations. Failure to maintain effective internal control over financial reporting could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price. We must continue to document, test and evaluate our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual reports by management regarding the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to the effectiveness of our internal control over financial reporting. We have expended, and expect that we will continue to expend, significant management time and resources documenting and testing our internal control over financial reporting. If we conclude in future periods that our internal control over financial reporting is not effective, it could result in lost investor confidence in the accuracy, reliability and completeness of our financial reports. Any such events could have an adverse effect on our stock price. Risks Relating to the Ownership of Our Common Stock Perception of the overall retail industry and other macroeconomic conditions may impact our stock price and operations. The retail industry continues to evolve and undergo structural change. This evolution and structural change have resulted in the bankruptcy and/or reorganization of various footwear specific and other publicly traded retailers. Despite our best efforts to differentiate our business model and processes, our stock price has fluctuated as a result of perceptions of the overall retail environment and investor confidence in the retail sector. The volatility in our stock price could be exacerbated by macroeconomic conditions that affect the market generally or our industry in particular and could have the effect of diverting management’s attention and could harm our business. We cannot provide any assurance that perception of the retail industry overall and other macroeconomic conditions will not continue to impact our stock price or our ability to engage business partners on terms acceptable to us. Our stock price may be volatile and could decline substantially. The stock market has, from time to time, experienced extreme price and volume fluctuations. Many factors may cause the market price for our common stock to decline, including: • operating results failing to meet the expectations of securities analysts or investors in any quarter; • downward revisions in securities analysts’ estimates; • material announcements by us or our competitors; and 23 • the other risk factors cited in this Annual Report on Form 10-K. The price of our common stock may decline and the value of any investment in our common stock may be reduced regardless of our performance. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If we become involved in securities class action litigation in the future, it could result in substantial costs and diversion of management attention and resources, thus harming our business. We cannot guarantee that we will continue to make dividend payments or that we will repurchase stock pursuant to our stock repurchase program. Our Board of Directors determines if it is in our best interest to pay a dividend to our shareholders and the amount of any dividend and declares all dividend payments. In the future, our results of operations and financial condition may not allow for a dividend to be declared, or the Board of Directors may decide not to continue to declare dividends. In addition, our current share repurchase program authorizes the purchase of up to $50 million of our common stock through December 31, 2025. However, we are not obligated to make any purchases under the share repurchase program and the program may be amended, suspended or discontinued at any time. We are controlled by our principal shareholders. J. Wayne Weaver, our Chairman of the Board of Directors, and his spouse together beneficially own approximately 33.8% of our outstanding common stock. In addition, Mr. Weaver's adult daughter is the sole trustee of several grantor retained annuity trusts and, as a result, beneficially owns less than 5% of our outstanding common stock held by such trusts. Accordingly, the Weaver family is able to exert substantial influence over our management and operations. In addition, their interests may differ from, or be opposed to, the interests of our other shareholders, and their ownership may have the effect of delaying or preventing a change in control that may be favored by other shareholders. Provisions of our organizational documents and Indiana law might deter acquisition bids for us. Our Amended and Restated Articles of Incorporation, our By-Laws and Indiana corporate laws contain provisions that may discourage other persons from attempting to acquire control of us, including, without limitation, a Board of Directors that has staggered three-year terms for its members, supermajority voting provisions, restrictions on the ability of shareholders to call a special meeting of shareholders and advance notice requirements in connection with shareholder proposals or director nominations. Additionally, the Board of Directors has the authority to issue preferred stock in one or more series without the approval of the holders of our common stock. Further, Indiana corporate law contains business combination provisions that, in general, prohibit for five years any business combination with a beneficial owner of 10% or more of our common stock unless the holder’s acquisition of the stock was approved in advance by our Board of Directors. Indiana corporate law also contains control share acquisition provisions that limit the ability of certain shareholders to vote their shares unless their control share acquisition is approved. In certain circumstances, the fact that corporate devices are in place that inhibit or discourage takeover attempts could reduce the market value of our common stock. 24 ITEM 1B. Unresolv ed staff comments None. ITEM 1C. CYBE RSECURITY Risk Management and Strategy Daily, we are threatened by system intrusions, social engineering attempts and web application attacks. These threats and attempts are directed at payment data, employee credentials, system passwords and personal information. We have developed and implemented a risk-based framework to address them. We consider cybersecurity a top risk within our enterprise risk management protocol, which is subject to oversight by our Board of Directors. Our risk-based processes, as designed, seek to maintain physical, administrative and technical controls that protect the confidentiality, integrity and availability of our information systems and information stored on our network, including customer information, personal information, intellectual property and proprietary information. We use the National Institute of Standards and Technology Cybersecurity Framework (the “NIST CSF”) as a guideline for our cybersecurity framework. This does not imply that we meet any technical standards, specifications or requirements under the NIST CSF, only that we use the NIST CSF as a framework to help us identify, assess and manage cybersecurity risks related to our business. Our policies for overall general information technology controls are also influenced by the Control Objectives for Information and Related Technologies, which align with the NIST CST. Our key cybersecurity processes are organized into four primary categories: • Outage and access: these processes address system intrusion and credential and password threats and risks; • Payment and loyalty rewards: these processes protect the information of our customers; • Personal data: these processes protect the payroll and healthcare data of our current and former employees and vendor information; and • Vendor partner security: these processes review the infrastructure and security processes of vendor partners that process transactions, provide cloud-based solutions and provide the backbone for our data flow. Key elements of our cybersecurity processes include, but are not limited to, the following: • Firewalls, data encryption and tokenization, multifactor authentication and data backup, among other safeguarding tactics; • Routine tests of our back up processes, the physical security of our data storage and access to systems via penetration testing; • A security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • Training and testing of the diligence and awareness of our employees regarding social engineering email and other cybersecurity schemes and risks; • Engaging third-party cybersecurity companies periodically to assess our cybersecurity posture and assist with identifying and remediating cybersecurity risks ; and • Contractual commitments from vendor partners and a review of controls at vendor partners via System and Organization Controls reports. 25 Governance Our Board of Directors oversees and guides our business and oversees our exposure to major risks. As stated in its charter, our Board of Directors has delegated to the Audit Committee, which currently includes the Board members with cybersecurity acumen, the responsibility for Board-level oversight of cybersecurity risk. As part of its oversight role, the Audit Committee receives reports about our protocols, material threats or incidents and other developments related to cybersecurity. These cybersecurity reports are provided to our Audit Committee at least annually, and these reports are delivered by our Senior Vice President and Chief Information Officer (“CIO”). Our CIO has over 30 years of experience with our information systems and is versed in cybersecurity frameworks and best practices. A security committee assists the CIO with developing controls, selecting vendor partners, identifying emerging threats and implementing best practices within our risk-based framework. Our security team is comprised of professionals with cybersecurity certifications and specialized training. The CIO addresses how we allocate capital resources to our cybersecurity processes with our executive leadership team, which includes our Chief Executive Officer, Chief Operating Officer, Chief Merchandising Officer and Chief Financial Officer. The CIO reports directly to our Chief Operating Officer. Process to Access, Identify and Manage Material Risks from Cybersecurity Threats When a cybersecurity incident occurs or we identify a vulnerability, our CIO and our security committee, which is described in more detail under “Governance” above, are responsible for leading the initial risk assessment, and external experts may also be engaged and our Audit Committee or full Board may also be consulted. If a breach of our control structure were to occur, our executive leadership team, Audit Committee and counsel would be briefed by the CIO and a determination would be made on whether such issue is material to warrant disclosure. As of February 1, 2025, we have not identified any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, cash flow or financial condition. Even with our current control processes and a continuous improvement mindset, cybersecurity threats constantly evolve. If the measures we have employed were to fail, or if a breach were to occur, it could result in impairment or loss of critical functions, such as the operation of our e-commerce websites, our Evansville distribution center, our corporate network and/or our point-of-sale systems, as examples. Additionally, confidential information could be compromised, or we could be defrauded or ransomed for a material amount of funds. Any of these outcomes could negatively affect our reputation and customer loyalty. The ultimate effects of a breach or loss in function or confidential information are difficult to quantify with any certainty, but such loss may be partially limited through insurance. See “Risk Factors—We could be adversely affected if our information technology systems fail to operate effectively, are disrupted or are compromised”, “—Various risks associated with our e-commerce platform may adversely affect our business and results of operations” and “—We outsource certain business processes to third-party vendors and have certain business relationships that subject us to risks, including disruptions to our business and increased costs” in PART I, ITEM 1A of this Annual Report on Form 10-K, which risk factors are incorporated by reference into this section of this Annual Report on Form 10-K. 26