SHOE STATION GROUP INC 10-Q

ITEM 1. FINANCIAL STATEMENTS SHOE CARNIVAL, INC. CONDENSED CONSOLID ATED BALANCE SHEETS Unaudited (In thousands, except share data) August 2, 2025 February 1, 2025 August 3, 2024 Assets Current Assets: Cash and cash equivalents $ 78,719 $ 108,680 $ 71,633 Marketable securities 13,198 14,432 12,831 Accounts receivable 8,457 9,018 5,519 Merchandise inventories 449,005 385,605 425,462 Other 24,689 18,409 21,651 Total Current Assets 574,068 536,144 537,096 Property and equipment – net 181,324 172,806 170,717 Operating lease right-of-use assets 338,950 343,547 337,926 Intangible assets 40,945 40,968 40,990 Goodwill 18,018 18,018 15,376 Other noncurrent assets 11,948 12,650 12,922 Total Assets $ 1,165,253 $ 1,124,133 $ 1,115,027 Liabilities and Shareholders’ Equity Current Liabilities: Accounts payable $ 68,662 $ 52,030 $ 73,916 Accrued and other liabilities 29,912 25,382 30,204 Current portion of operating lease liabilities 57,889 53,013 55,870 Total Current Liabilities 156,463 130,425 159,990 Long-term portion of operating lease liabilities 303,689 314,974 304,578 Deferred income taxes 23,295 18,879 15,187 Deferred compensation 10,243 10,011 12,564 Other 873 848 4,213 Total Liabilities 494,563 475,137 496,532 Shareholders’ Equity: Common stock, $ 0.01 par value, 50,000,000 shares authorized and 41,049,190 shares issued in each period, respectively 410 410 410 Additional paid-in capital 89,462 90,371 86,208 Retained earnings 793,517 773,353 746,996 Treasury stock, at cost, 13,676,368 shares, 13,874,787 shares and 13,875,495 shares, respectively ( 212,699 ) ( 215,138 ) ( 215,119 ) Total Shareholders’ Equity 670,690 648,996 618,495 Total Liabilities and Shareholders’ Equity $ 1,165,253 $ 1,124,133 $ 1,115,027 See notes to Condensed Consolidated Financial Statements. 3 SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited (In thousands, except per share data) Thirteen Weeks Ended August 2, 2025 Thirteen Weeks Ended August 3, 2024 Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Net sales $ 306,388 $ 332,696 $ 584,103 $ 633,061 Cost of sales (including buying, distribution and occupancy costs) 187,580 212,753 369,518 406,318 Gross profit 118,808 119,943 214,585 226,743 Selling, general and administrative expenses 93,580 89,864 177,392 174,157 Operating income 25,228 30,079 37,193 52,586 Interest income ( 782 ) ( 672 ) ( 1,885 ) ( 1,475 ) Interest expense 77 137 155 273 Income before income taxes 25,933 30,614 38,923 53,788 Income tax expense 6,708 8,041 10,355 13,929 Net income $ 19,225 $ 22,573 $ 28,568 $ 39,859 Net income per share: Basic $ 0.70 $ 0.83 $ 1.05 $ 1.47 Diluted $ 0.70 $ 0.82 $ 1.04 $ 1.45 Weighted average shares: Basic 27,339 27,159 27,286 27,151 Diluted 27,455 27,500 27,470 27,452 See notes to Condensed Consolidated Financial Statements. 4 SHOE CARNIVAL, INC. CONDENSED CONSOLIDATED STATE MENTS OF SHAREHOLDERS’ EQUITY Unaudited Thirteen Weeks Ended Common Stock Additional Paid-In Retained Treasury (In thousands, except per share data) Issued Treasury Amount Capital Earnings Stock Total Balance at May 3, 2025 41,049 ( 13,713 ) $ 410 $ 87,921 $ 778,517 $ ( 213,267 ) $ 653,581 Dividends declared ($ 0.150 per share) ( 4,225 ) ( 4,225 ) Employee stock purchase plan purchases 3 1 48 49 Stock-based compensation awards 36 ( 560 ) 560 0 Shares surrendered by employees to pay taxes on stock-based compensation awards ( 2 ) ( 40 ) ( 40 ) Stock-based compensation expense 2,100 2,100 Net income 19,225 19,225 Balance at August 2, 2025 41,049 ( 13,676 ) $ 410 $ 89,462 $ 793,517 $ ( 212,699 ) $ 670,690 Balance at May 4, 2024 41,049 ( 13,891 ) $ 410 $ 84,576 $ 728,175 $ ( 215,357 ) $ 597,804 Dividends declared ($ 0.135 per share) ( 3,752 ) ( 3,752 ) Employee stock purchase plan purchases 3 13 40 53 Stock-based compensation awards 13 ( 198 ) 198 0 Stock-based compensation expense 1,817 1,817 Net income 22,573 22,573 Balance at August 3, 2024 41,049 ( 13,875 ) $ 410 $ 86,208 $ 746,996 $ ( 215,119 ) $ 618,495 Twenty-six Weeks Ended Common Stock Additional Paid-In Retained Treasury (In thousands, except per share data) Issued Treasury Amount Capital Earnings Stock Total Balance at February 1, 2025 41,049 ( 13,875 ) $ 410 $ 90,371 $ 773,353 $ ( 215,138 ) $ 648,996 Dividends declared ($ 0.30 per share) ( 8,404 ) ( 8,404 ) Employee stock purchase plan purchases 6 9 88 97 Stock-based compensation awards 294 ( 4,564 ) 4,564 0 Shares surrendered by employees to pay taxes on stock-based compensation awards ( 101 ) ( 2,213 ) ( 2,213 ) Stock-based compensation expense 3,646 3,646 Net income 28,568 28,568 Balance at August 2, 2025 41,049 ( 13,676 ) $ 410 $ 89,462 $ 793,517 $ ( 212,699 ) $ 670,690 Balance at February 3, 2024 41,049 ( 13,919 ) $ 410 $ 83,738 $ 714,647 $ ( 215,406 ) $ 583,389 Dividends declared ($ 0.27 per share) ( 7,510 ) ( 7,510 ) Employee stock purchase plan purchases 4 32 60 92 Stock-based compensation awards 59 ( 915 ) 915 0 Shares surrendered by employees to pay taxes on stock-based compensation awards ( 19 ) ( 688 ) ( 688 ) Stock-based compensation expense 3,353 3,353 Net income 39,859 39,859 Balance at August 3, 2024 41,049 ( 13,875 ) $ 410 $ 86,208 $ 746,996 $ ( 215,119 ) $ 618,495 See notes to Condensed Consolidated Financial Statements. 5 SHOE CARNIVAL, INC. CONDENSED CONSOLIDAT ED STATEMENTS OF CASH FLOWS Unaudited (In thousands) Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Cash Flows From Operating Activities Net income $ 28,568 $ 39,859 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,760 15,116 Stock-based compensation 3,646 3,574 Loss on retirement and impairment of assets, net 1,097 215 Deferred income taxes 4,416 ( 486 ) Non-cash operating lease expense 30,660 28,307 Other 240 810 Changes in operating assets and liabilities: Accounts receivable 560 ( 561 ) Merchandise inventories ( 63,400 ) ( 37,177 ) Operating leases ( 32,473 ) ( 29,223 ) Accounts payable and accrued liabilities 22,508 20,498 Other ( 8,960 ) ( 190 ) Net cash provided by operating activities 3,622 40,742 Cash Flows From Investing Activities Purchases of property and equipment ( 24,408 ) ( 15,722 ) Investments in marketable securities ( 1,498 ) ( 35 ) Sales of marketable securities 2,970 0 Acquisition, net of cash acquired 0 ( 44,384 ) Net cash used in investing activities ( 22,936 ) ( 60,141 ) Cash Flows From Financing Activities Proceeds from issuance of stock 97 92 Dividends paid ( 8,531 ) ( 7,372 ) Shares surrendered by employees to pay taxes on stock-based compensation awards ( 2,213 ) ( 688 ) Net cash used in financing activities ( 10,647 ) ( 7,968 ) Net decrease in cash and cash equivalents ( 29,961 ) ( 27,367 ) Cash and cash equivalents at beginning of period 108,680 99,000 Cash and cash equivalents at end of period $ 78,719 $ 71,633 Supplemental disclosures of cash flow information: Capital expenditures incurred but not yet paid $ 1,898 $ 671 Dividends declared but not yet paid $ 500 $ 417 Contingent consideration related to business acquisition $ 0 $ 3,600 See notes to Condensed Consolidated Financial Statements. 6 SHOE CARNIVAL, INC. NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS Unaudited Note 1 – Basis of Presentation Shoe Carnival, Inc. is one of the nation’s largest omnichannel sellers of footwear for the family, selling footwear and related products through our retail stores located in 35 states within the continental United States and in Puerto Rico, as well as through our e-commerce sales channel. We offer customers a broad assortment of primarily branded dress and casual shoes, sandals, boots and athletic footwear and accessories for men, women and children with an emphasis on national name brands through our Shoe Carnival, Shoe Station and Rogan’s store fronts. We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to “we,” “us,” “our” and the “Company” in this Quarterly Report on Form 10-Q refer to Shoe Carnival, Inc. and its subsidiaries. Our consolidated financial statements include the accounts of Shoe Carnival, Inc. and its wholly-owned subsidiaries Rogan Shoes, Incorporated (“Rogan’s”), SCHC, Inc. and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned subsidiary of SCHC, Inc. All intercompany accounts and transactions have been eliminated. In our opinion, the accompanying unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and contain all normal recurring adjustments necessary to fairly present our financial position and the results of our operations and our cash flows for the periods presented. Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted as permitted by the rules and regulations of the SEC although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 . Note 2 - Acquisition of Rogan Shoes On February 13, 2 024, we acquired all of the stock of Rogan Shoes, Incorporated, a privately-held 53-year-old work and family footwear company incorporated in Wisconsin, for a purchase price of $ 44.8 million, net of $ 2.2 million of cash acquired, which was paid with cash on hand . This included $ 378,000 of working capital adjustments which were paid in fourth quarter 2024. Additional consideration of up to $ 5.0 million may be paid by the Company subject to the achievement of three-year growth targets. At the time of the acquisition, Rogan’s operated 28 store locations in Wisconsin, Minnesota and Illinois. The Rogan’s acquisition advanced our strategy to be the nation’s leading family footwear retailer. It immediately positioned us as the market leader in Wisconsin, and it established a store base in Minnesota, creating additional expansion opportunities. Rogan’s results were included in our consolidated financial statements since the acquisition date. Net Sales from our Rogan’s operations were $ 20.0 million and $ 39.0 million in the thirteen and twenty-six weeks ended August 2, 2025, respectively, $ 22.0 million in the thirteen weeks ended August 3, 2024 and $ 41.6 million from February 13, 2024 through August 3, 2024. For the thirteen and twenty-six weeks ended August 3, 2024, acquisition-related costs of $ 97,000 and $ 418,000 , respectively, were expensed as incurred and were included in Selling, General and Administrative Expenses (“SG&A”), compared to no acquisition-related costs included in SG&A in either the thirteen or twenty-six weeks ended August 2, 2025. The following table summarizes the purchase price and the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed. We measured these fair values using Level 3 inputs. The excess purchase price over the fair value of net assets acquired was allocated to Goodwill. 7 (In thousands) Purchase price: Cash consideration, net of cash acquired $ 44,762 Fair value of contingent consideration 3,600 Total purchase price $ 48,362 Fair value of identifiable assets and liabilities: Accounts receivable $ 2,365 Merchandise inventories 42,340 Other assets 2,000 Operating lease right-of-use assets 16,891 Identifiable intangible assets: Trade name 7,500 Customer relationships 900 Goodwill 5,994 Total assets $ 77,990 Accounts payable 6,308 Operating lease liabilities 19,843 Deferred income taxes 974 Accrued and other liabilities 2,503 Total liabilities $ 29,628 Total fair value allocation of purchase price $ 48,362 Our fair value estimate of the Merchandise Inventories for Rogan’s was determined using the Comparative Sales and Replacement Cost methods. Our fair value estimate related to the identified intangible asset of Rogan’s trade name was determined using the Relief from Royalty method, and the significant assumptions used for the valuation include the royalty rate, estimated projected revenues, long-term growth rate and the discount rate. Our fair value estimates related to Rogan’s customer relationships were determined using the Multi-Period Excess Earnings method, and the significant assumptions used for the valuation include projected cash flows, the discount rate and customer attrition rate. Our fair value estimate of the contingent consideration for the Rogan’s acquisition was determined using a Monte Carlo simulation and other methods that account for the probabilities of various outcomes and was recorded in Other long-term liabilities. Significant assumptions used for the valuation include the discount rate, projected cash flows and calculated volatility. It is remeasured on a recurring basis at fair value using the same methods, and the resulting fair value adjustments are reflected within SG&A. See Note 5 — “Fair Value Measurements” for additional discussion related to our contingent consideration. Identifiable intangible assets include Rogan’s trade name and customer relationships. We assigned an indefinite life to Rogan’s trade name; therefore, Goodwill and Rogan’s trade name will be charged to expense only if impaired. Impairment reviews will be conducted at least annually and involve a comparison of fair value to the carrying amount. If fair value is less than the carrying amount, an impairment loss would be recognized in SG&A. Customer relationships are subject to amortization and will be amortized over a period of 20 years. Goodwill and the acquisition-related Intangible Assets are not deductible for tax purposes. 8 Note 3 - Net Income Per Share The following table sets forth the computation of Basic and Diluted Net Income per Share as shown on the face of the accompanying Condensed Consolidated Statements of Income: Thirteen Weeks Ended August 2, 2025 August 3, 2024 (In thousands, except per share data) Basic Net Income per Share: Net Income Shares Per Share Amount Net Income Shares Per Share Amount Net income available for basic common shares and basic net income per share $ 19,225 27,339 $ 0.70 $ 22,573 27,159 $ 0.83 Diluted Net Income per Share: Net income $ 19,225 $ 22,573 Conversion of stock-based compensation arrangements 0 116 0 341 Net income available for diluted common shares and diluted net income per share $ 19,225 27,455 $ 0.70 $ 22,573 27,500 $ 0.82 Twenty-six Weeks Ended August 2, 2025 August 3, 2024 (In thousands, except per share data) Basic Net Income per Share: Net Income Shares Per Share Amount Net Income Shares Per Share Amount Net income available for basic common shares and basic net income per share $ 28,568 27,286 $ 1.05 $ 39,859 27,151 $ 1.47 Diluted Net Income per Share: Net income $ 28,568 $ 39,859 Conversion of stock-based compensation arrangements 0 184 0 301 Net income available for diluted common shares and diluted net income per share $ 28,568 27,470 $ 1.04 $ 39,859 27,452 $ 1.45 The computation of Basic Net Income per Share is based on the weighted average number of common shares outstanding during the period. The computation of Diluted Net Income per Share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units. During the thirteen and twenty-six weeks ended August 2, 2025 , approximately 10,000 of unvested stock-based awards that will be settled in shares were excluded from the computation of Diluted Net Income per Share because the impact would have been anti-dilutive. No unvested stock-based awards that will be settled in shares were excluded from the computation of Diluted Net Income per Share for the thirteen and twenty-six weeks ended August 3, 2024 . Note 4 - Recently Issued Accounting Pronouncements and Tax Legislation In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted. The guidance will require additional disclosures in the Income Taxes footnote but will not have an impact on our Consolidated Financial Statements. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and related disclosures. 9 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, domestic research cost expensing and the business interest expense limitation. Accounting Standards Codification Topic No. 740, "Income Taxes", requires that we recognize the effects of changes in tax rates and laws in the period in which the legislation is enacted. Consequently, in the thirteen weeks ended August 2, 2025, we recognized an increase in our deferred tax expense, primarily due to the impact of the 100 % bonus depreciation and domestic research cost expensing provided for in the OBBB, partially offset by reductions in our current tax expense. We expect that the OBBB will not have a material impact on our financial statements, including on our Fiscal 2025 effective tax rate. Note 5 - Fair Value Measurements Financial Instruments The following table presents financial instruments that are measured at fair value on a recurring basis at August 2, 2025, February 1, 2025 and August 3, 2024: Fair Value Measurements (In thousands) Level 1 Level 2 Level 3 Total As of August 2, 2025 Cash equivalents - money market mutual funds $ 53,882 $ 0 $ 0 $ 53,882 Marketable securities - mutual funds that fund deferred compensation 13,198 0 0 13,198 Total $ 67,080 $ 0 $ 0 $ 67,080 As of February 1, 2025 Cash equivalents - money market mutual funds $ 95,963 $ 0 $ 0 $ 95,963 Marketable securities - mutual funds that fund deferred compensation 14,432 0 0 14,432 Total $ 110,395 $ 0 $ 0 $ 110,395 As of August 3, 2024 Cash equivalents - money market mutual funds $ 44,072 $ 0 $ 0 $ 44,072 Marketable securities - mutual funds that fund deferred compensation 12,831 0 0 12,831 Total $ 56,903 $ 0 $ 0 $ 56,903 We invest in publicly traded mutual funds with readily determinable fair values. These Marketable Securities are designed to mitigate volatility in our Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of August 2, 2025, these Marketable Securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. To the extent there is a variation in invested funds compared to the total non-qualified deferred compensation plan liability, such fund variance is managed through a stable value mutual fund. We classify these Marketable Securities as current assets because we have the ability to convert the securities into cash at our discretion and these Marketable Securities are not held in a rabbi trust. Changes in these Marketable Securities and deferred compensation plan liabilities are charged to SG&A. Contingent Consideration The following table presents liabilities that are measured at fair value on a recurring basis at August 2, 2025, February 1, 2025 and August 3, 2024: Fair Value Measurements (In thousands) Level 1 Level 2 Level 3 Total As of August 2, 2025 Contingent consideration $ 0 $ 0 $ 406 $ 406 Total $ 0 $ 0 $ 406 $ 406 As of February 1, 2025 Contingent consideration $ 0 $ 0 $ 395 $ 395 Total $ 0 $ 0 $ 395 $ 395 As of August 3, 2024 Contingent consideration $ 0 $ 0 $ 3,728 $ 3,728 Total $ 0 $ 0 $ 3,728 $ 3,728 See Note 2 — “Acquisition of Rogan Shoes” for additional discussion related to our contingent consideration. 10 Deferred Compensation Plan Liabilities and Related Marketable Securities The following tables present the balances and activity of the Company’s deferred compensation plan liabilities and related Marketable Securities: (In thousands) August 2, 2025 February 1, 2025 August 3, 2024 Deferred compensation plan current liabilities $ 2,510 $ 4,259 $ 193 Deferred compensation plan long-term liabilities 10,243 10,011 12,564 Total deferred compensation plan liabilities $ 12,753 $ 14,270 $ 12,757 Marketable securities - mutual funds that fund deferred compensation $ 13,198 $ 14,432 $ 12,831 (In thousands) Thirteen Weeks Ended August 2, 2025 Thirteen Weeks Ended August 3, 2024 Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Deferred compensation liabilities Employer contributions, net $ 65 $ 71 $ 179 $ 152 Investment earnings 724 259 288 582 Marketable Securities Mark-to-market gains (1) ( 891 ) ( 276 ) ( 286 ) ( 584 ) Net deferred compensation (income) expense $ ( 102 ) $ 54 $ 181 $ 150 (1) Included in the mark-to-market activity related to equity securities still held at quarter-end, we recognized unrealized gains of $ 903,000 and $ 258,000 for the thirteen weeks ended August 2, 2025 and August 3, 2024, respectively, and unrealized gains of $ 809,000 and $ 550,000 for the twenty-six weeks ended August 2, 2025 and August 3, 2024, respectively. The fair values of Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued and Other Liabilities approximate their carrying values because of their short-term nature. Long-Lived Asset Impairment Testing We periodically evaluate our long-lived assets for impairment if events or circumstances indicate that the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. Store level asset groupings typically include Property and Equipment and Operating Lease Right-of-Use Assets, net of the current and long-term portions of Operating Lease Liabilities. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in SG&A. If the Operating Lease Right-of-Use Asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease term. No impairment charges were recorded during the twenty-six weeks ended August 2, 2025 or the twenty-six weeks ended August 3, 2024 . Note 6 - Stock-Based Compensation Stock-based compensation includes share-settled awards issued pursuant to the Shoe Carnival, Inc. Amended and Restated 2017 Equity Incentive Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights. For the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024, stock-based compensation expense was comprised of the following: (In thousands) Thirteen Weeks Ended August 2, 2025 Thirteen Weeks Ended August 3, 2024 Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Share-settled equity awards $ 2,091 $ 1,774 $ 3,629 $ 3,303 Stock appreciation rights 0 0 0 221 Employee Stock Purchase Plan 9 43 17 50 Total stock-based compensation expense $ 2,100 $ 1,817 $ 3,646 $ 3,574 Income tax effect at statutory rates $ ( 511 ) $ ( 442 ) $ ( 887 ) $ ( 869 ) Additional income tax expense (benefit) on vesting of share-settled awards $ 14 $ 0 $ 469 $ ( 109 ) 11 As of August 2, 2025 , approximately $ 13.2 million of unrecognized compensation expense remained related to our share-settled equity awards. The cost is expected to be recognized over a weighted average period of approximately 1.8 years. Share-Settled Equity Awards The following table summarizes transactions for our restricted stock units and performance stock units: Number of Shares Weighted- Average Grant Date Fair Value Outstanding at February 1, 2025 695,259 $ 29.71 Granted 416,031 21.64 Vested ( 259,725 ) 28.79 Forfeited ( 59,113 ) 29.47 Outstanding at August 2, 2025 792,452 $ 25.80 The total fair value at grant date of restricted stock units and performance stock units that vested during the twenty-six weeks ended August 2, 2025 and August 3, 2024 was $ 7.5 million and $ 1.4 million, respectively. The weighted-average grant date fair value of restricted stock units and performance stock units granted during the twenty-six weeks ended August 3, 2024 was $ 32.06 . The following table summarizes transactions for our restricted stock and other stock awards: Number of Shares Weighted- Average Grant Date Fair Value Outstanding at February 1, 2025 0 $ 0.00 Granted 34,488 18.85 Vested ( 5,306 ) 18.85 Forfeited 0 0.00 Outstanding at August 2, 2025 29,182 $ 18.85 The total fair value at grant date of restricted stock and other stock awards that vested during the twenty-six weeks ended August 2, 2025 was $ 100,000 . No restricted stock or other stock awards vested during the twenty-six weeks ended August 3, 2024. The weighted-average grant date fair value of restricted stock awards granted during the twenty-six weeks ended August 3, 2024 was $ 36.84 . 12 Note 7 – Revenue Disaggregation of Net Sales by Product Category Net Sales and percentage of Net Sales, disaggregated by product category, for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 were as follows: (In thousands) Thirteen Weeks Ended August 2, 2025 Thirteen Weeks Ended August 3, 2024 Non-Athletics: Women’s $ 74,254 24 % $ 84,285 25 % Men’s 54,837 18 58,663 18 Children’s 20,047 7 23,243 7 Total 149,138 49 166,191 50 Athletics: Women’s 47,827 16 49,649 15 Men’s 54,874 18 56,636 17 Children’s 37,739 12 39,971 12 Total 140,440 46 146,256 44 Accessories 15,950 5 18,872 6 Other 860 0 1,377 0 Total $ 306,388 100 % $ 332,696 100 % (In thousands) Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Non-Athletics: Women’s $ 141,392 24 % $ 161,813 25 % Men’s 103,959 18 107,856 17 Children’s 39,166 7 44,639 7 Total 284,517 49 314,308 49 Athletics: Women’s 95,524 16 99,831 16 Men’s 104,975 18 108,785 17 Children’s 67,671 12 73,536 13 Total 268,170 46 282,152 46 Accessories 29,307 5 33,884 5 Other 2,109 0 2,717 0 Total $ 584,103 100 % $ 633,061 100 % Accounting Policy and Performance Obligations We operate as an omnichannel, family footwear retailer and provide the convenience of shopping at our physical stores or shopping online through our e-commerce platform. As part of our omnichannel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock at a particular store. We also offer “buy online, pick up in store” services for our customers. “Buy online, pick up in store” provides the convenience of local pickup for our customers. For our physical stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products. This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store. For sales made through our e-commerce sales 13 channel in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped. This also includes sales made via our Shoes 2U program when the customer chooses home delivery. We offer our customers sales incentives including coupons, discounts, and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in Cost of Sales. Gift card revenue is recognized at the time of redemption. When a customer makes a purchase as part of our rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions. Transaction Price and Payment Terms The transaction price is the amount of consideration we expect to receive from our customers and is reduced by any stated promotional discounts at the time of purchase. The transaction price may be variable due to terms that permit customers to exchange or return products for a refund. The implicit contract with the customer reflected in the transaction receipt states the final terms of the sale, including the description, quantity, and price of each product purchased. The customer agrees to a stated price in the contract that does not vary over the term of the contract and may include revenue to offset shipping costs. Taxes imposed by governmental authorities such as sales taxes are excluded from Net Sales. We accept various forms of payment from customers at the point of sale typical for an omnichannel retailer. Payments made for products are generally collected when control passes to the customer, either at the point of sale or at the time the customer order is shipped. For Shoes 2U transactions, customers may order the product at the point of sale. For these transactions, customers pay in advance and unearned revenue is recorded as a contract liability in Accrued and Other Liabilities. We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer). Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at August 2, 2025, February 1, 2025 or August 3, 2024. Returns and Refunds We have established an allowance based upon historical experience in order to estimate return and refund transactions. This allowance is recorded as a reduction in sales with a corresponding refund liability recorded in Accrued and Other Liabilities. The estimated cost of Merchandise Inventories is reco rded as a reduction to Cost of Sales and an increase in Merchandise Inventories. Approximately $ 1.1 million of refund liabilities and $ 726,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, as of August 2, 2025 and February 1, 2025. Approximately $ 962,000 of refund liabilities and $ 618,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, at August 3, 2024. Contract Liabilities The issuance of a gift card is recorded as an increase to contract liabilities and a decrease to contract liabilities when a customer redeems a gift card. Estimated breakage is determined based on historical breakage percentages and recognized as revenue based on expected gift card usage. We do not record breakage revenue when escheat liability to relevant jurisdictions exists. At August 2, 2025, February 1, 2025 and August 3, 2024 , approximately $ 2.0 million, $ 2.3 million and $ 2.6 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and Other Liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two years. Breakage revenue associated with our gift cards recognized in Net Sales was no t material to any of the periods presented. Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards. Points under Shoe Perks are earned primarily by making purchases through any of our omnichannel points of sale. Once a certain threshold of accumulated points is reached, the customer earns a reward certificate, which is redeemable through any of our sales channels. When a Shoe Perks customer makes a purchase, we allocate the transaction price between the goods purchased and the loyalty reward points earned based on the relative standalone selling price. The portion allocated to the points program is recorded as a contract liability for rewards that are expected to be redeemed. We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates. During the thirteen and twenty-six weeks ended August 2, 2025 , approximately $ 988,000 and $ 1.9 million, respectively, of loyalty rewards were recognized in Net Sales. During the thirteen and twenty-six weeks ended August 3, 2024 , approximately $ 790,000 and $ 1.6 million, respectively, of loyalty rewards were recognized in Net Sales . At August 2, 2025, February 1, 2025 and August 3, 2024 , approximately $ 728,000 , $ 564,000 and $ 574,000 , respectively, of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year. 14 Note 8 – Segment Reporting Shoe Carnival, Inc. has a single operating and reportable segment that sells footwear and related merchandise for the family across our retail banners and sales channels. With respect to our omnichannel strategy, our e-commerce sales channel is integrated with our Shoe Carnival, Shoe Station and Rogan’s physical store locations across 35 states and Puerto Rico and is fundamentally inseparable in how we serve our target customers. Our chief operating decision maker (“CODM”) is our President and Chief Executive Officer . The CODM assesses performance and decides how to allocate resources based on Net Income that also is reported on the income statement as our consolidated Net Income. The CODM uses Net Income to evaluate performance in deciding whether to reinvest profits, facilitate acquisitions or return funds to shareholders through dividends or share repurchases. Net Income is used to monitor budget versus actual results and in competitive analysis by benchmarking to our peers and competitors. The benchmarking analysis and the monitoring of budgeted versus actual results are used in assessing our performance and in establishing management’s compensation. We have concluded that, on the basis of the principles in FASB ASU 2023-07, Segment Reporting (Topic 280), the expenses below require disclosure under the significant expense principle. The CODM does not review assets in evaluating results. Therefore, such information is not provided. Operating financial results of our segment for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 were as follows: (In thousands) Thirteen Weeks Ended August 2, 2025 Thirteen Weeks Ended August 3, 2024 Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Net sales $ 306,388 $ 332,696 $ 584,103 $ 633,061 Less: Merchandise & delivery costs (1) 164,824 190,283 323,668 361,818 Store occupancy costs 22,756 22,470 45,850 44,500 Store expenses (2) 42,253 43,025 81,738 83,511 E-commerce expenses (3) 3,751 4,870 8,108 9,641 Advertising 18,427 14,225 29,527 26,149 Store depreciation and other selling expenses (4) 10,925 9,946 21,571 19,494 General and administrative expenses (5) 18,224 17,798 36,448 35,362 Interest income ( 782 ) ( 672 ) ( 1,885 ) ( 1,475 ) Interest expense 77 137 155 273 Income tax expense 6,708 8,041 10,355 13,929 Net income $ 19,225 $ 22,573 $ 28,568 $ 39,859 (1) Merchandise & delivery costs include the cost of merchandise and other buying and distribution costs. (2) Store expenses include selling expenses generally controlled operationally at the store level, such as store level payroll. (3) E-commerce expenses include primarily website maintenance costs and other selling expenses. (4) Other selling expenses include store-related health care, other insurance, licensing/tax costs and Property and Equipment write-offs. (5) General and administrative expenses include departmental and corporate expenses, including incentive and share-based compensation and merger and integration expenses. Note 9 – Leases We lease all of our physical stores, our Evansville, Indiana distribution center, which has a current lease term expiring in 2034 , our Fort Mill, South Carolina corporate headquarters and other warehousing space. We also enter into leases of equipment and other assets. Substantially all of our leases are operating leases; however, as a result of the acquisition of Rogan’s, we also acquired certain assets subject to finance leases. The finance lease assets and related current liabilities and noncurrent liabilities were recorded in Other Noncurrent Assets, Accrued and Other Liabilities and Other long-term liabilities, respectively. Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties or any sublease arrangements with any related party or third party as of August 2, 2025, February 1, 2025 or August 3, 2024. 15 Lease costs, including other related occupancy costs, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024: (In thousands) Thirteen Weeks Ended August 2, 2025 Thirteen Weeks Ended August 3, 2024 Twenty-six Weeks Ended August 2, 2025 Twenty-six Weeks Ended August 3, 2024 Operating lease cost $ 17,787 $ 17,311 $ 35,678 $ 34,486 Variable lease cost Occupancy costs 5,653 5,742 11,539 11,502 Percentage rent and other variable lease costs 176 308 448 273 Finance lease cost Amortization of leased assets 8 8 16 15 Interest on lease liabilities 3 3 5 5 Total $ 23,627 $ 23,372 $ 47,686 $ 46,281 16