What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-06 compared with 2024-12-06 · 108 added, 144 removed, 120 unchanged (68% of the section changed)

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These factors include, but are not limited to:

our ability to control costs and meet our labor needs in a rising wage, inflationary, and/or supply chain constrained environment;

our ability to increase our comparable stores Net Sales and achieve expected operating results from rebannering Shoe Carnival locations into Shoe Station locations within expected time frames, or at all;

our ability to achieve expected operating results from, and planned growth of, our Shoe Station banner within expected time frames, or at all;

the impact of competition and pricing, including our ability to maintain current promotional intensity levels;

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;

our ability to control costs and meet our labor needs in a rising wage, inflationary, and/or supply chain constrained environment;

the effects and duration of economic downturns and unemployment rates;

our ability to achieve expected operating results from, and planned growth of, our Shoe Station banner, which includes the recently acquired stores and operations of Rogan’s, within expected time frames, or at all;

the potential impact of national and international security concerns, including those caused by war and terrorism, on the retail environment;

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changes in our relationships with other key suppliers;

our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition;

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the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees, including as a result of a cybersecurity breach;

our ability to effectively integrate Rogan’s, retain Rogan’s employees, and achieve the expected operating results, synergies, efficiencies and other benefits from the Rogan’s acquisition within the expected time frames, or at all;

risks that the Rogan’s acquisition may disrupt our current plans and operations or negatively impact our relationship with our vendors and other suppliers;

our ability to effectively achieve the operating results from, and maintain the synergies, efficiencies and other benefits gained through, our acquisition strategy, including our recent acquisition of Rogan’s;

our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, our ability to identify, consummate or effectively integrate future acquisitions, our ability to implement and adapt to new technology and systems, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our business plans;

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We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 as filed with the SEC.

This section of this Quarterly Report on Form 10-Q generally discusses our results for third quarter 2024 and third quarter 2023 and year-over-year comparisons between third quarter 2024 and third quarter 2023, as well as year-to-date results for, and comparisons between, the two periods.

Referred to herein, third quarter 2024 is the thirteen weeks ended November 2, 2024 and third quarter 2023 is the thirteen weeks ended October 28, 2023.

Also referred to herein, year-to-date 2024 is the thirty-nine weeks ended November 2, 2024 and year-to-date 2023 is the thirty-nine weeks ended October 28, 2023.

This section of this Quarterly Report on Form 10-Q generally discusses our results for first quarter 2025 and first quarter 2024 and year-over-year comparisons between first quarter 2025 and first quarter 2024.

Referred to herein, first quarter 2025 is the thirteen weeks ended May 3, 2025 and first quarter 2024 is the thirteen weeks ended May 4, 2024.

Overview of Our Business

Shoe Carnival, Inc.

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

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

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

Shoe Carnival and Shoe Station.

On February 13, 2024, we furthered our acquisition strategy by acquiring all of the stock of Rogan Shoes, Incorporated (“Rogan’s”).

The acquisition of Rogan’s added 28 physical stores (25 in Wisconsin, 2 in Minnesota, and 1 in Illinois) to our portfolio, positioned us as the market leader in Wisconsin and established a store base in Minnesota, creating additional expansion opportunities.

As previously noted, Rogan’s is being integrated into our Shoe Station banner and our current plan is to brand and operate these stores over time using both the Rogan’s and Shoe Station trade names.

We furthered our acquisition strategy by acquiring all of the stock of

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

More information about the acquisition of Rogan’s can be found in Note 2 — “Acquisition of Rogan Shoes” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

Our objective is to be the nation’s leading family footwear retailer.

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

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

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

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

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

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

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

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

The Shoe Station banner and retail locations, including Rogan’s locations, are a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics.

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

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

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

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

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

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

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Quarter Ended

August 3, 2024

November 2, 2024

April 29, 2023

July 29, 2023

October 28, 2023

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

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

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

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

All Rogan’s sales (physical stores and e-commerce) are excluded from our comparable stores Net Sales.

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

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

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

As a result, each of our first three quarters in Fiscal 2024 is shifted one week later compared to Fiscal 2023.

This one-week shift impacts our year-over-year sales comparisons when there are seasonal sales influences that fall near the respective quarter-end dates.

To minimize the effect of this fiscal calendar shift on comparable stores Net Sales, our reported comparable stores Net Sales results for third quarter 2024 in this Quarterly Report on Form 10-Q and our other public disclosures compare the thirteen-week and thirty-nine week periods ended November 2, 2024 to the thirteen-week and thirty-nine week periods ended November 4, 2023.

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

Rogan’s comparable stores Net Sales will begin to be included in our comparable stores Net Sales calculations in second quarter 2025.

The following table sets forth our results of operations expressed as a percentage of Net Sales for the periods indicated:

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Cost of sales (including buying, distribution and

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Income tax expense

Executive Summary for Third Quarter Ended November 2, 2024

During third quarter 2024, Net Sales of $306.9 million were down $13.0 million, or 4.1%, compared to third quarter 2023.

Due to the calendar shift described above, an important week of the back-to-school season that was included in third quarter 2023 was moved into the second quarter in Fiscal 2024.

The net effect of this shift decreased third quarter 2024 Net Sales by approximately $20 million compared to third quarter 2023.

In third quarter 2024, Net Sales otherwise increased $7.0 million, or 2.2%, compared to third quarter 2023.

This increase was led by Rogan’s, which was acquired on February 13, 2024 and delivered third quarter 2024 Net Sales of approximately $22.3 million, and new store growth from Shoe Station stores.

On a comparable store basis, which excludes the impact of the calendar shift, Rogan’s sales and sales from other new stores, Net Sales were down 4.1%.

During third quarter 2024, our comparable stores Net Sales grew in August due to our strong back-to-school performance;

however, comparable stores Net Sales declined in September and October due to the impact of two hurricanes on approximately half of our stores and the shopping habits of our customer base in the affected locations and persistently warm weather, which has delayed demand for fall seasonal merchandise.

In the quarter, boot sales were down 31%, reflecting approximately half of the comparable stores Net Sales decline in third quarter 2024.

Comparable stores Net Sales growth in athletics partially offset these lower boot sales.

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

During third quarter 2024, our gross profit margin was above 35% for the 15th consecutive quarter at 36.0% and decreased approximately 80 basis points compared to third quarter 2023, primarily due to higher buying, distribution and occupancy costs (“BD&O”) from operating more stores and the deleveraging effect of the lower, shifted Net Sales during the quarter.

On a year-to-date basis, which now includes the material offsetting impacts of the retail calendar shift, Net Sales in 2024 totaled $939.9 million, an increase of 4.9% versus year-to-date 2023 and gross profit margin was consistent with the prior year.

As market conditions softened in September and October, we lowered selling costs at Shoe Carnival and Shoe Station stores.

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

In third quarter 2024, our selling, general, and administrative expenses (“SG&A”) were lower than third quarter 2023 by $3.9 million as these lower store selling expenses more than offset the cost of operating Rogan’s stores.

While Rogan’s costs were an additional expense in third quarter 2024 compared to third quarter 2023, those cost increases were mitigated by the synergies captured during third quarter 2024 from completing the integration of Rogan’s store operations, marketing, e-commerce platforms, point-of-sale systems, merchandising and back office functions.

We currently estimate that Rogan’s synergy capture will be over $1 million in Fiscal 2024, with a significant portion of that recognized in third quarter 2024.

Third quarter 2024 Operating Income totaled $24.5 million and decreased 12.2% versus third quarter 2023, primarily due to the lower Net Sales from the calendar shift and soft demand in September and October.

These declines were partially offset by growth, principally from the Rogan’s acquisition and related synergies, as well as lower SG&A.

Operating Income in third quarter 2024 included $369,000 in merger and integration expenses related to the Rogan’s acquisition, of which $248,000 were in Cost of Sales and $121,000 were in SG&A.

Third quarter 2024 Net Income was $19.2 million, or $0.70 per diluted share, compared to third quarter 2023 Net Income of $21.9 million, or $0.80 per diluted share.

The decrease reflected the lower Operating Income and a higher effective tax rate.

Merchandise Inventories totaled $406.6 million at the end of third quarter 2024, an increase of approximately $38.3 million compared to the end of third quarter 2023, primarily reflecting Rogan’s acquired inventory.

Merchandise Inventories supporting the Shoe Carnival and Shoe Station bannered stores were approximately 1% lower on a dollar basis at the end of third quarter 2024 compared to the end of third quarter 2023.

At the end of third quarter 2024, we had total Cash, Cash Equivalents and Marketable Securities of $91.1 million.

Cash and Cash Equivalents increased $17.3 million compared to the end of third quarter 2023, and cash flows from operations in year-to-date 2024 totaled $58.1 million.

Fiscal 2023 year end marked the 19th consecutive year we ended the fiscal year with no debt, and in year-to-date 2024, we continued to fund our operations and growth investments, including the purchase of Rogan’s, from operating cash flows and without incurring debt.

In year-to-date 2024, we have paid $44.4 million for Rogan’s and, based on the purchase price adjustments, we owed another $378,000 that was paid in November 2024.

Up to an additional $5.0 million in consideration will be due in 2027 if three-year performance targets are met.

Results of Operations for Third Quarter Ended November 2, 2024 Compared to Third Quarter Ended October 28, 2023

Net Sales were $306.9 million during third quarter 2024, a decrease of $13.0 million or 4.1%, compared to third quarter 2023.

The decrease reflected the impact of the calendar shift moving approximately $20 million of Net Sales out of third quarter 2024.

Net Sales otherwise increased $7.0 million, or 2.2%, compared to third quarter 2023.

This increase was primarily due to the acquisition of Rogan’s, which added Net Sales of $22.3 million in third quarter 2024, and new store growth in the Shoe Station banner, partially offset by a comparable stores Net Sales decline of 4.1%.

During third quarter 2024, our comparable stores Net Sales grew in August due to our strong back-to-school performance;

In third quarter 2024, boot sales were down 31%, reflecting approximately half of the comparable stores Net Sales decline in the quarter.

E-commerce sales were approximately 11% of merchandise sales in third quarter 2024, compared to 10% in third quarter 2023.

Gross Profit was $110.4 million during third quarter 2024, a decrease of $7.3 million compared to third quarter 2023.

Gross profit margin in third quarter 2024 was 36.0% compared to 36.8% in third quarter 2023.

The decrease in gross profit margin was driven by BD&O, which increased in third quarter 2024 compared to third quarter 2023 due to higher occupancy costs associated with operating more stores and the deleveraging effect of lower Net Sales in third quarter 2024 compared to third quarter 2023.

The decrease in gross profit margin was partially offset by a 50 basis point increase in merchandise margin in third quarter 2024 compared to third quarter 2023 .

Executive Summary for First Quarter Ended May 3, 2025

Our first quarter 2025 Net Income was $9.3 million, or $0.34 per diluted share, and was lower than the $17.3 million, or $0.63 per diluted share, reported in first quarter 2024.

While our profits were down compared to last year, this reduction reflected our decision to invest in and accelerate our rebanner strategy, a choice that resulted in early successes in first quarter 2025.

Our results were also impacted by broader industry headwinds primarily affecting our Shoe Carnival banner and its customer base.

Our Net Sales declined 7.5% in first quarter 2025 compared to first quarter 2024, similar to declines across the broader family footwear industry.

This decline was primarily due to a 10.0% decline in Net Sales at our Shoe Carnival banner.

In contrast, our Shoe Station banner achieved Net Sales growth of 4.9% in first quarter 2025 compared to first quarter 2024.

Our comparable stores Net Sales declined 8.1% primarily due to a high-single digit comparable stores Net Sales decline at our Shoe Carnival banner, partially offset by a comparable stores Net Sales increase at our Shoe Station banner.

Over the last two years, our view of industry data supports that Shoe Station has been the family footwear industry's fastest growing retailer.

Over the same period, our Shoe Carnival banner and the family footwear industry have experienced comparable stores Net Sales declines.

Earlier this year, we announced plans to grow our Shoe Station banner from a market leader in the Southeast into a national footwear and accessories leader.

As part of this plan, we rebannered 10 Shoe Carnival stores to Shoe Station stores during a test phase in Fiscal 2024 and rebannered an additional 24 stores in first quarter 2025.

With respect to these 34 rebannered stores and related omnichannel growth, highlights of the early successes experienced in first quarter 2025 compared to first quarter 2024 include:

• Double-digit comparable stores Net Sales growth, outperforming the comparable stores Net Sales decline at our Shoe Carnival banner by over 20%;

• Double-digit increases in average unit retail selling prices;

• Increased product margins at rebannered stores;

• Double-digit increases in store level profit.

As a result of our early successes and continued industry declines impacting our Shoe Carnival banner, we accelerated this transformational strategy and now expect approximately 120 stores, or 28% of our current store fleet, to operate as a Shoe Station store by the end of Fiscal 2025.

An additional 51 stores are expected to rebanner in Fiscal 2025 (20 in second quarter 2025, 25 in third quarter 2025 and 6 in fourth quarter 2025).

We have established a new goal that by March 2027, over 80% of our current fleet is expected to operate as a Shoe Station store.

Our previous goal was that over 51% of our current fleet would operate as a Shoe Station store by March 2027.

We view our rebanner strategy as the most effective method to stabilize and eventually grow our Net Sales and increase our market share and the productivity of our store base in areas where we underperformed, or believe we can perform even better, with our Shoe Station concept.

To achieve this acceleration, we expect a reduction in our annual Fiscal 2025 Operating Income of between $20 and $25 million for store closing costs, amortization of new store construction costs, a four-to-six-week store closure period through each store's grand opening, customer acquisition costs and other costs.

We continue to estimate the payback of this investment over a two-to-three year period after a store’s grand opening.

During first quarter 2025, we estimate this rebanner strategy impacted our

Operating Income by approximately $5.5 million, or $0.15 per diluted share, inclusive of an approximate 1% decline in Net Sales due to lost sales and a 2% increase in our SG&A as a percent of Net Sales.

Additionally, we expect capital expenditures supporting the rebanner initiative to be in a range of $30 to $40 million in Fiscal 2025, of which $10.3 million were incurred during first quarter 2025.

We remain confident that these investments, though impacting near-term profitability, position us for more sustainable performance as we progress through this strategic transformation.

The Fiscal 2024 year end marked the 20th consecutive year where we ended a fiscal year with no debt, fully funding our operations, acquisitions and investments from operating cash flow.

In first quarter 2025, we also funded our operations, including our rebanner investments and inventory positions, without incurring any debt and grew our Cash, Cash Equivalents and Marketable Securities by $23.5 million compared to the end of first quarter 2024.

At the end of first quarter 2025, we had approximately $93.0 million of Cash, Cash Equivalents and Marketable Securities available and $99.0 million of available borrowings under our existing credit facility to fund our growth objectives.

Our Merchandise Inventories increased approximately 4% at the end of first quarter 2025 compared to the end of first quarter 2024.

Inventory was purchased in advance of the tariff increases announced in April 2025 at competitive costs and at levels that are expected to protect, and perhaps increase, our gross profit margins if costs rise.

The level of in-stock positions we are maintaining across key categories is continuing to support strong conversion rates, and we believe our inventory on hand positions us well to navigate any potential supply chain disruptions.

As a result of our retail-focused operations, we have flexibility to adjust our inventory levels as conditions evolve, balancing working capital efficiency with ensuring product availability in this current uncertain environment.

Results of Operations for First Quarter Ended May 3, 2025 Compared to First Quarter Ended May 4, 2024

Net Sales were $277.7 million during first quarter 2025, a decrease of $22.7 million, or 7.5%, compared to first quarter 2024.

The decrease was primarily due to a 10.0% Net Sales decline in the Shoe Carnival banner due to a decline in traffic and lost sales as impacted by the rebanner strategy.

The Shoe Carnival banner’s high-single digit comparable stores Net Sales decline was the main driver of our overall 8.1% comparable stores Net Sales decline.

These decreases were partially offset by continued growth from the Shoe Station banner’s 4.9% Net Sales increase compared to first quarter 2024.

E-commerce sales were approximately 9% of merchandise sales in first quarters 2025 and 2024.

Gross Profit was $95.8 million during first quarter 2025, a decrease of $11.0 million compared to first quarter 2024.

Gross profit margin in first quarter 2025 was 34.5% compared to 35.6% in first quarter 2024.

The decrease in gross profit margin was driven by the deleveraging effect of buying, distribution and occupancy costs due to lower Net Sales in first quarter 2025 compared to first quarter 2024.

The decrease in gross profit margin was partially offset by a 50 basis point increase in merchandise margin in first quarter 2025 compared to first quarter 2024 .

Selling, General and Administrative Expenses

SG&A decreased $3.9 million in third quarter 2024 to $85.9 million compared to $89.8 million in third quarter 2023.

The decrease in SG&A expenses was due primarily to lower selling costs at Shoe Carnival and Shoe Station bannered stores, partially offset by the costs associated with operating the recently acquired Rogan’s stores.

As a percentage of Net Sales, SG&A were 28.0% in third quarter 2024 compared to 28.1% in third quarter 2023.

Interest Income and Interest Expense

Changes in our interest income and expense increased our income before taxes by $247,000 in third quarter 2024 compared to third quarter 2023.

SG&A decreased $481,000 in first quarter 2025 to $83.8 million compared to $84.3 million in first quarter 2024.

Operating expense increases associated with the rebanner strategy were offset by the timing of selling expenses for our other stores in first quarter 2025 compared to first quarter 2024.

As a percent of Net Sales, SG&A were 30.2% in first quarter 2025 compared to 28.1% in first quarter 2024, with the increase being due primarily to the rebanner costs incurred in first quarter 2025 and lower Net Sales.

First quarter 2024 SG&A included $321,000 of merger and integration expenses compared to no merger and integration expenses in first quarter 2025.

Interest and Interest Expense

Changes in our interest income and expense increased our income before taxes by $358,000 in first quarter 2025 compared to first quarter 2024.

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

The effective income tax rate for third quarter 2024 was 24.7% compared to 23.8% for third quarter 2023.

The effective income tax rate for first quarter 2025 was 28.1% compared to 25.4% for first quarter 2024.

Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events.

The higher effective tax rate in third quarter 2024 compared to third quarter 2023 was primarily due to discrete adjustments recorded in third quarter 2023 that did not recur in third quarter 2024.

For the full 2024 fiscal year, we expect our tax rate to be between 25.6% and 26.0% compared to the 23.7% effective tax rate recognized during the full 2023 fiscal year.

Results of Operations Year-to-Date Through November 2, 2024 Compared to Year-to-Date Through October 28, 2023

Net Sales were $939.9 million during year-to-date 2024 and increased 4.9% compared to year-to-date 2023.

The increase was primarily due to the acquisition of Rogan’s, which added Net Sales of $63.9 million, and new store growth in the Shoe Station banner, partially offset by a 3.2% decrease in comparable stores Net Sales.

E-commerce sales were approximately 10% of merchandise sales in year-to-date 2024, compared to 9% in year-to-date 2023.

Year-to-date 2024 e-commerce sales were favorably impacted by the relaunch of www.shoecarnival.com in third quarter 2023 and the launch of www.shoestation.com in first quarter 2023.

Gross Profit was $337.1 million during year-to-date 2024, an increase of $15.4 million compared to year-to-date 2023.

Gross profit margin was 35.9% in both year-to-date 2024 and year-to-date 2023.

This consistency was driven by stable merchandise margins and stable BD&O as a percentage of Net Sales in year-to-date 2024 compared to year-to-date 2023.

Selling, General and Administrative Expenses

SG&A increased $11.9 million, or 4.8%, in year-to-date 2024 to $260.0 million compared to $248.1 million in year-to-date 2023.

The increase was primarily due to higher compensation-related costs, including compensation costs related to Rogan’s, and other Rogan’s-related operating expenses in year-to-date 2024, partially offset by other lower selling costs at Shoe Carnival and Shoe Station stores.

As a percentage of Net Sales, SG&A were 27.7% in both year-to-date 2024 and year-to-date 2023.

Interest Income and Interest Expense

Changes in our interest income and expense increased our income before taxes by $675,000 in year-to-date 2024 compared to year-to-date 2023.

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

The effective income tax rate for year-to-date 2024 was 25.5% compared to 23.0% for year-to-date 2023.

The higher effective tax rate in year-to-date 2024 compared to year-to-date 2023 was due to the decrease in tax benefits from share-settled equity awards in year-to-date 2024 and a state deferred tax benefit and other discrete adjustments included in year-to-date 2023 that did not recur in Fiscal 2024.

The higher effective tax rate in first quarter 2025 compared to first quarter 2024 was primarily due to discrete adjustments recorded in both first quarters 2025 and 2024 related to share-settled equity awards.

For the full 2025 fiscal year, we expect our tax rate to be approximately 26% compared to the 24.3% effective tax rate recognized during the full 2024 fiscal year.

Liquidity and Capital Resources

Our primary sources of liquidity are $91.1 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of third quarter 2024, cash generated from operations and availability under our $100 million Credit Agreement.

Our primary sources of liquidity are $93.0 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of first quarter 2025, cash generated from operations and availability under our $100 million Credit Agreement.

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

Our primary uses of cash are normally for working capital, which are principally inventory purchases, investments in our stores, such as rebanners and new stores, remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share

repurchases under our share repurchase program and the financing of capital projects, including investments in new systems.

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

Cash Flow - Operating Activities

Net cash generated from operating activities was $58.1 million in year-to-date 2024 compared to $69.4 million in year-to-date 2023.

The change in operating cash flow was primarily driven by the timing of inventory and prepaid contracts payments.

Working capital increased on a year-over-year basis and totaled $391.3 million at November 2, 2024 compared to $340.6 million at October 28, 2023.

The increase was primarily attributable to higher Merchandise Inventories and Accounts Receivable levels due to the acquisition of Rogan’s and a higher cash balance, partially offset by higher Accounts Payable.

Our current ratio was 3.9 as of November 2, 2024 compared to 3.8 as of October 28, 2023.

Net cash used in operating activities was $9.6 million in first quarter 2025 compared to net cash provided by operating activities of $17.1 million in first quarter 2024.

The change in operating cash flow was primarily driven by the timing of inventory purchases in advance of tariff increases, expenses to support the rebanner strategy and lower earnings.

Working capital increased on a year-over-year basis and totaled $399.0 million at May 3, 2025 compared to $355.8 million at May 4, 2024.

The increase was primarily attributable to a higher cash balance and higher Merchandise Inventories.

Our current ratio was 3.7 as of May 3, 2025 compared to 3.4 as of May 4, 2024.

Cash Flow – Investing Activities

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

During year-to-date 2024 and 2023, we expended $24.8 million and $43.6 million, respectively, for the purchase of Property and Equipment, primarily related to store remodels and rebanners and opening four new Shoe Station stores.

Our Rogan’s acquisition in first quarter 2024 resulted in the payment of initial cash consideration of $44.4 million, net of cash acquired, during year-to-date 2024.

Additional information regarding the Rogan’s acquisition, including information on the additional contingent consideration of up to $5.0 million, can be found in Note 2 — “Acquisition of Rogan Shoes” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

During the first quarters of 2025 and 2024, we expended $13.3 million and $10.2 million, respectively, for the purchase of Property and Equipment, primarily related to store rebanners and remodels and opening new Shoe Station stores.

Our Rogan’s acquisition in first quarter 2024 resulted in the payment of initial cash consideration of $44.6 million, net of cash acquired.

Additional information regarding the Rogan’s acquisition can be found in Note 2 — “Acquisition of Rogan Shoes” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

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

The balance of these Marketable Securities was $13.9 million at November 2, 2024, compared to $12.2 million at February 3, 2024 and $11.2 million at October 28, 2023.

The balance of these Marketable Securities was $14.5 million at May 3, 2025, compared to $14.4 million at February 1, 2025 and $12.6 million at May 4, 2024.

Additional information can be found in Note 5 — “Fair Value Measurements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

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Our cash inflows from financing activities generally reflect stock issuances to employees under our Employee Stock Purchase Plan and borrowings under our Credit Agreement.

During year-to-date 2024, net cash used in financing activities was $11.6 million compared to $17.2 million during year-to-date 2023.

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

During first quarter 2025, net cash used in financing activities was $6.5 million compared to $4.4 million during first quarter 2024.

The increase in net cash used in financing activities was primarily due to the increase in shares surrendered by employees to pay taxes on stock-based compensation awards and increased dividend payments.

Credit Agreement

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Material covenants associated with the Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0.

We were in compliance with these covenants as of November 2, 2024.

We were in compliance with these covenants as of May 3, 2025.

The Credit Agreement contains certain restrictions.

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The Credit Agreement stipulates that cash dividends and share repurchases of $15 million or less per fiscal year can be made without restriction as long as there is no default or event of default before and immediately after such distributions.

We are also permitted to make acquisitions and pay cash dividends or repurchase shares in excess of $15 million in a fiscal year provided that (a) no default or event of default exists before and immediately after the transaction and (b) on a proforma basis, the ratio of (i) the sum of (A) our consolidated funded indebtedness plus (B) three times our consolidated rental expense to (ii) the sum of (A) our consolidated EBITDA plus (B) our consolidated rental expense is less than 3.5 to 1.0.

We are also permitted to make acquisitions and pay cash dividends or repurchase shares in excess of $15 million

in a fiscal year provided that (a) no default or event of default exists before and immediately after the transaction and (b) on a proforma basis, the ratio of (i) the sum of (A) our consolidated funded indebtedness plus (B) three times our consolidated rental expense to (ii) the sum of (A) our consolidated EBITDA plus (B) our consolidated rental expense is less than 3.5 to 1.0.

Among other restrictions, the Credit Agreement also limits our ability to incur additional secured or unsecured debt to $20 million.

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A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment.

During year-to-date 2024, we did not borrow or repay funds under the Credit Agreement.

Letters of credit outstanding were $1.0 million at November 2, 2024 and our borrowing capacity was $99.0 million.

During first quarter 2025, we did not borrow or repay funds under the Credit Agreement.

Letters of credit outstanding were $1.0 million at May 3, 2025 and our borrowing capacity was $99.0 million.

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

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Capital Expenditures

Capital expenditures for Fiscal 2024, including actual expenditures in year-to-date 2024, are expected to be between $30 million and $35 million, with approximately $20 million to $25 million to be used for new and rebannered stores and remodels and approximately $10 million to $15 million for upgrades to our Evansville distribution center and e-commerce sales channels, various other store improvements, continued investments in technology and normal asset replacement activities.

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

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

Capital expenditures for Fiscal 2025, including actual expenditures in first quarter 2025, are expected to be between $45 million and $60 million, with approximately $30 million to $40 million to be used for rebannered stores, approximately $5 million for other store growth and approximately $10 million to $15 million for upgrades to our Evansville distribution center and e-commerce platform, various other store improvements, continued investments in technology and normal asset replacement activities.

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

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

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

Store Portfolio

We opened four new Shoe Station branded stores, permanently closed one Shoe Carnival branded store and acquired 28 Rogan’s stores, which over time are being integrated into our Shoe Station banner, in year-to-date 2024.

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

We currently have 431 stores and are targeting operating over 500 stores in 2028.

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

Since our acquisition of Shoe Station in December 2021, we have gained valuable insights about the Shoe Station customer base and have defined markets where we believe a Shoe Station bannered store may outperform our current Shoe Carnival bannered store located in those markets.

The Company advanced its store rebanner growth strategy during third quarter 2024, with seven Shoe Carnival stores being rebannered to Shoe Station stores.

Ten stores have now been rebannered.

Through third quarter 2024, rebannered stores have outperformed expectations, and based on the successful results of the strategy to date, we plan to rebanner 25 additional Shoe Carnival stores to Shoe Station stores in the first half of Fiscal 2025.

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

We currently have 429 stores and we believe our current store footprint provides for growth in new markets within the United States as well as fill-in opportunities within existing markets.

We plan to rebanner over 50 additional Shoe Carnival stores into Shoe Station stores in the last three quarters of Fiscal 2025 and plan to complete additional rebanners in Fiscal 2026 and early Fiscal 2027.

Once complete, we expect over 80% of our present store fleet to operate as Shoe Station stores by March 2027.

We also opened new Shoe Station stores and closed Shoe Carnival stores in the thirteen weeks ended May 3, 2025 and May 4, 2024 as follows:

Quarter ended May 3, 2025

Shoe Carnival

Quarter ended May 4, 2024

Shoe Carnival

We expect limited store openings and closures in the near term as we execute our rebanner strategy and increase our scale through acquisitions.

Dividends and Share Repurchases

On September 17, 2024, the Board of Directors approved the payment of a third quarter 2024 cash dividend paid to our shareholders.

The quarterly cash dividend of $0.135 per share was paid on October 21, 2024 to shareholders of record as of the close of business on October 7, 2024.

In third quarter 2023, the dividend paid was $0.120 per share.

During year-to-date 2024 and 2023, we returned $11.0 million and $8.9 million, respectively, to our shareholders through our quarterly cash dividends.

On March 12, 2025, the Board of Directors approved an 11.1% increase in our cash dividend paid to our shareholders in first quarter 2025.

The quarterly cash dividend of $0.15 per share was paid on April 21, 2025 to shareholders of record as of the close of business on April 7, 2025.

In first quarter 2024, the dividend paid was $0.135 per share.

During first quarters 2025 and 2024, we returned $4.4 million and $3.7 million, respectively, to our shareholders through our quarterly cash dividends.

The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.

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The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market and economic factors.

No share repurchases have been made to date in Fiscal 2024.

During year-to-date 2023, we repurchased 230,696 shares of common stock at a total cost of $5.4 million.

No share repurchases have been made to date in Fiscal 2025 and no share repurchases were made during first quarter 2024.

Our Credit Agreement permits the payment of dividends and repurchase of shares, subject to certain covenants and restrictions.

See “Credit Agreement” above and Note 10 — “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 for a further discussion of the Credit Agreement, its covenants and restrictions regarding dividends and share repurchases and other matters.

The Credit Agreement’s covenants and restrictions did not change during year-to-date 2024.

The Credit Agreement’s covenants and restrictions did not change during first quarter 2025.

We have three distinct peak selling periods:

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We do not use interest rate derivative instruments to manage exposure to changes in market interest rates.

We had no borrowings outstanding during year-to-date 2024.

We had no borrowings outstanding during first quarter 2025.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis