What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-05 compared with 2025-06-06 · 113 added, 81 removed, 147 unchanged (57% of the section changed)

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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 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.

This section of this Quarterly Report on Form 10-Q generally discusses our results for second quarter 2025 and second quarter 2024 and year-over-year comparisons between second quarter 2025 and second quarter 2024, as well as year-to-date results for, and comparisons between, the two periods.

Referred to herein, second quarter 2025 is the thirteen weeks ended August 2, 2025 and second quarter 2024 is the thirteen weeks ended August 3, 2024.

Also referred to herein, year-to-date 2025 is the twenty-six weeks ended August 2, 2025 and year-to-date 2024 is the twenty-six weeks ended August 3, 2024.

Overview of Our Business

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Shoe Carnival and Shoe Station.

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.

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.

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Quarter Ended

August 2, 2025

August 3, 2024

(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.

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

Rogan’s comparable stores Net Sales are included in our comparable stores Net Sales quarterly

calculations beginning in second quarter 2025.

Rogan’s comparable stores Net Sales will begin to be included in our comparable stores Net Sales year-to-date and annual calculations beginning in Fiscal 2026.

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

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

Cost of sales (including buying, distribution and

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Income tax expense

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.

Executive Summary for Second Quarter Ended August 2, 2025

Our second quarter 2025 Net Income was $19.2 million, or $0.70 per diluted share, and was lower than the $22.6 million, or $0.82 per diluted share, reported in second quarter 2024.

Our second quarter 2025 results reflected $0.21 per diluted share of rebanner strategy investments.

Three strategic decisions shaped second quarter 2025.

First, we prioritized Gross Profit margin over pursuing lower-quality, lower-profit sales.

Second, we invested in inventory depth to improve availability for the third quarter 2025 Back-to-School period.

Third, we continued investing in our rebanner program despite market uncertainty.

We achieved a Gross Profit margin of 38.8%, up 270 basis points from second quarter 2024.

The increase included a 390 basis point increase in our merchandise margin, driven by disciplined pricing across all banners, a favorable mix shift toward Shoe Station’s higher income customers and strategic inventory investments that improved in-stock rates on key merchandise.

This more than offset 120 basis points of deleverage in buying, distribution and occupancy costs.

Our Net Sales declined 7.9% in second quarter 2025 compared to second quarter 2024.

This decline was primarily due to a 10.1% decline in Net Sales at our Shoe Carnival banner as we maintained pricing discipline despite pressure on the lower-income consumer.

In contrast, our Shoe Station banner achieved Net Sales growth of 1.6% in second quarter 2025 compared to second quarter 2024, driven by our rebanner strategy.

Our comparable stores Net Sales declined 7.5%, primarily due to a high-single digit comparable stores Net Sales decline at our Shoe Carnival banner, partially offset by break-even comparable stores Net Sales at our Shoe Station banner.

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%;

As part of this plan, we rebannered 10 Shoe Carnival stores to Shoe Station stores during a test phase in Fiscal 2024 and have rebannered 44 stores in Fiscal 2025, of which 20 were rebannered in second quarter 2025.

With respect to these 54 rebannered stores and related omnichannel growth, in second quarter 2025, we achieved a low single-digit increase in Net Sales and an over 300 basis point increase in product margin.

On a year-to-date 2025 basis, these rebannered stores achieved the following:

• Mid single-digit comparable stores Net Sales growth, outperforming the comparable stores Net Sales decline at our Shoe Carnival banner by over 15%;

• 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.

• Increased product margins;

• High single-digit growth in store-level profit.

We expect to rebanner an additional 58 stores in the second half of Fiscal 2025 (29 in third quarter 2025 and 29 in fourth quarter 2025).

As a result, approximately 145 stores, or one-third of our current store fleet, is expected to operate as a Shoe Station store by the end of Fiscal 2025, reflecting a further acceleration of our rebanner plan, including the rebannering of all Rogan’s stores, while also broadly

utilizing the Rogan’s tradename.

We continue to expect that 51% of our fleet will operate as a Shoe Station store by August 2026 and that over 80% of our current fleet will 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.

To achieve this growth, we expect a reduction in our annual Fiscal 2025 Operating Income of approximately $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.

During second quarter 2025, we estimate this rebanner strategy impacted our Operating Income by approximately $7.5 million, or $0.21 per diluted share, and in year-to-date 2025, we estimate this rebanner strategy impacted our Operating Income by approximately $13.0 million, or $0.36 per diluted share.

Both the quarter and year-to-date periods include an approximate 1% decline in Net Sales due to lost sales and an approximate 2% increase in our Selling, General and Administrative Expenses (“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 $35 million in Fiscal 2025, of which approximately $20 million have been incurred in year-to-date 2025.

Though impacting near-term profitability, we expect these investments will position us for more sustainable performance in the future.

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.

Through second 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 $7.5 million compared to the end of second quarter 2024.

At the end of second quarter 2025, we had approximately $91.9 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 at the end of second quarter 2025 were $449.0 million, up approximately 5% compared to the end of second quarter 2024.

We increased our inventory positions this year in advance of our peak Back-to-School selling period and this improved availability of key merchandise drove margin expansion and positive comparable stores Net Sales during August 2025.

We believe our inventory on hand positions us well to navigate any potential supply chain disruptions.

We expect to normalize inventory levels during Fiscal 2026 as supply chain visibility improves.

Results of Operations for Second Quarter Ended August 2, 2025 Compared to Second Quarter Ended August 3, 2024

Net Sales were $306.4 million during second quarter 2025, a decrease of $26.3 million, or 7.9%, compared to second quarter 2024.

The decrease was primarily due to a 10.1% Net Sales decline in the Shoe Carnival banner due to a decline in traffic and lost sales as impacted by our rebanner strategy.

The Shoe Carnival banner’s high-single digit comparable stores Net Sales decline was the main driver of our overall 7.5% 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 .

These decreases were partially offset by continued growth from the Shoe Station banner’s 1.6% Net Sales increase compared to second quarter 2024.

E-commerce sales were approximately 8% of merchandise sales in second quarter 2025, compared to 9% in second quarter 2024.

Gross Profit was $118.8 million during second quarter 2025, a decrease of $1.1 million compared to second quarter 2024.

Gross profit margin in second quarter 2025 was 38.8% compared to 36.1% in second quarter 2024.

The increase in gross profit margin was driven by a 390 basis point increase in merchandise margin due to promotional and pricing strategies and the cost of inventory acquired.

This increase was partially offset by the deleveraging effect of buying, distribution and occupancy costs due to lower Net Sales in second quarter 2025 compared to second quarter 2024.

Selling, General and Administrative Expenses

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 first quarter 2025 was 28.1% compared to 25.4% for first quarter 2024.

SG&A increased $3.7 million in second quarter 2025 to $93.6 million compared to $89.9 million in second quarter 2024.

The increase was due primarily to expenses associated with our rebanner strategy, partially offset by decreases in expenses impacting our other stores in second quarter 2025 compared to second quarter 2024.

As a percent of Net Sales, SG&A were 30.6% in second quarter 2025 compared to 27.1% in second quarter 2024, with the increase being due primarily to the rebanner costs incurred in second quarter 2025 and lower Net Sales.

The effective income tax rate for second quarter 2025 was 25.9% compared to 26.3% for second 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 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.

The lower effective tax rate in second quarter 2025 compared to second quarter 2024 was primarily due to nondeductible expenses incurred in Fiscal 2024 associated with the acquisition of Rogan’s.

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.

Results of Operations Year-to-Date Through August 2, 2025 Compared to Year-to-Date Through August 3, 2024

Net Sales were $584.1 million during year-to-date 2025, a decrease of $49.0 million, or 7.7%, compared to year-to-date 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 our rebanner strategy.

The Shoe Carnival banner’s high-single digit comparable stores Net Sales decline was the main driver of our overall 7.9% comparable stores Net Sales decline.

These decreases were partially offset by continued growth from the Shoe Station banner’s 2.9% Net Sales increase compared to year-to-date 2024.

E-commerce sales were approximately 9% of merchandise sales in both year-to-date 2025 and year-to-date 2024.

Gross Profit was $214.6 million during year-to-date 2025, a decrease of $12.2 million compared to year-to-date 2024.

Gross profit margin in year-to-date 2025 was 36.7% compared to 35.8% in year-to-date 2024.

The increase in gross profit margin was driven by a 230 basis point increase in merchandise margin due to promotional and pricing strategies and the cost of inventory acquired.

This increase was partially offset by the deleveraging effect of buying, distribution and occupancy costs due to lower Net Sales in year-to-date 2025 compared to year-to-date 2024.

Selling, General and Administrative Expenses

SG&A increased $3.2 million in year-to-date 2025 to $177.4 million compared to $174.2 million in year-to-date 2024.

The increase was due primarily to expenses associated with our rebanner strategy, partially offset by decreases in expenses impacting our other stores in year-to-date 2025 compared to year-to-date 2024.

As a percent of Net Sales, SG&A were 30.3% in year-to-date 2025 compared to 27.5% in year-to-date 2024, with the increase being due primarily to the rebanner costs incurred in year-to-date 2025 and lower Net Sales.

Interest Income and Interest Expense

Changes in our interest income and expense increased our income before taxes by $528,000 in year-to-date 2025 compared to year-to-date 2024.

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

The effective income tax rate for year-to-date 2025 was 26.6% compared to 25.9% for year-to-date 2024.

The higher effective tax rate in year-to-date 2025 compared to year-to-date 2024 was due to discrete adjustments recorded in both Fiscal 2025 and Fiscal 2024 related to share-settled equity awards, offset by nondeductible expenses incurred in Fiscal 2024 associated with the acquisition of Rogan’s.

Liquidity and Capital Resources

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.

Our primary sources of liquidity are $91.9 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of second 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.

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Cash Flow - Operating Activities

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.

Net cash generated from operating activities was $3.6 million in year-to-date 2025 compared to $40.7 million in year-to-date 2024.

The decrease in operating cash flow was primarily driven by increased inventory purchases in advance of our peak Back-to-School selling period, the timing of prepaid contract payments and expenses to support our rebanner strategy.

Working capital increased on a year-over-year basis and totaled $417.6 million at August 2, 2025 compared to $377.1 million at August 3, 2024.

The increase was primarily attributable to higher Merchandise Inventories, a higher cash balance and lower Accounts Payable.

Our current ratio was 3.7 as of August 2, 2025 compared to 3.4 as of August 3, 2024.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBB").

The OBBB makes key elements of the Tax Cuts and Jobs Act permanent, including 100% bonus depreciation and domestic research cost expensing.

We estimate that the OBBB will decrease our cash taxes to be paid for Fiscal 2025 by approximately 30%.

We expect no material change in our effective income tax rate for Fiscal 2025 as a result of the OBBB.

Cash Flow – Investing Activities

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

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.

During year-to-date 2025 and 2024, we expended $24.4 million and $15.7 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.

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

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

The balance of these Marketable Securities was $13.2 million at August 2, 2025, compared to $14.4 million at February 1, 2025 and $12.8 million at August 3, 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 first quarter 2025, net cash used in financing activities was $6.5 million compared to $4.4 million during first quarter 2024.

During year-to-date 2025, net cash used in financing activities was $10.6 million compared to $8.0 million during year-to-date 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.

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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 May 3, 2025.

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

During year-to-date 2025, we did not borrow or repay funds under the Credit Agreement.

Letters of credit outstanding were $1.0 million at August 2, 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 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.

Capital expenditures for Fiscal 2025, including actual expenditures in year-to-date 2025, are expected to be between $45 million and $55 million, with approximately $30 million to $35 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.

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We currently have 428 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

We plan to rebanner 58 additional stores into Shoe Station stores in the second half of Fiscal 2025 and plan to complete additional rebanners in Fiscal 2026 and early Fiscal 2027.

We continue to expect that over 50% of our present store fleet will operate as Shoe Station stores by Back-to-School 2026 and over 80% of our present store fleet will operate as Shoe Station stores by March 2027.

In Fiscal 2025, we rebannered 24 Shoe Carnival stores in the first quarter and 20 Shoe Carnival stores in the second quarter.

We also opened new Shoe Station stores and closed Shoe Carnival stores in the twenty-six weeks ended August 2, 2025 and August 3, 2024 as follows:

Twenty-six Weeks Ended August 2, 2025

Shoe Carnival

Quarter ended May 4, 2024

Twenty-six Weeks Ended August 3, 2024

Shoe Carnival

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Dividends and Share Repurchases

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.

On June 25, 2025, the Board of Directors approved the payment of a second quarter cash dividend paid to our shareholders.

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

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

During year-to-date 2025 and 2024, we returned $8.5 million and $7.4 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 2025 and no share repurchases were made during first quarter 2024.

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

The Credit Agreement’s covenants and restrictions did not change during year-to-date 2025.

We have three distinct peak selling periods:

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Recent Accounting Pronouncements

See Note 4 — “Recently Issued Accounting Pronouncements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that may have an impact on our condensed consolidated financial statements when adopted.

See Note 4 — “Recently Issued Accounting Pronouncements and Tax Legislation” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that may have an impact on our condensed consolidated financial statements when adopted.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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

We had no borrowings outstanding during first quarter 2025.

We had no borrowings outstanding during year-to-date 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