SHOE STATION GROUP INC 10-Q

ITEM 1. FINANCIAL STATEMENTS SHOE CARNIVAL, INC. CONDENSED CONSOLID ATED BALANCE SHEETS Unaudited (In thousands, except share data) November 1, 2025 February 1, 2025 November 2, 2024 Assets Current Assets: Cash and cash equivalents $ 94,369 $ 108,680 $ 77,235 Marketable securities 13,294 14,432 13,866 Accounts receivable 7,094 9,018 8,678 Merchandise inventories 435,296 385,605 406,599 Other 22,986 18,409 20,662 Total Current Assets 573,039 536,144 527,040 Property and equipment – net 187,779 172,806 174,171 Operating lease right-of-use assets 340,931 343,547 351,023 Intangible assets 40,934 40,968 40,979 Goodwill 18,018 18,018 18,018 Other noncurrent assets 11,840 12,650 13,198 Total Assets $ 1,172,541 $ 1,124,133 $ 1,124,429 Liabilities and Shareholders’ Equity Current Liabilities: Accounts payable $ 65,853 $ 52,030 $ 57,283 Accrued and other liabilities 23,567 25,382 20,050 Current portion of operating lease liabilities 51,906 53,013 58,432 Total Current Liabilities 141,326 130,425 135,765 Long-term portion of operating lease liabilities 310,885 314,974 317,679 Deferred income taxes 25,203 18,879 17,639 Deferred compensation 10,988 10,011 13,449 Other 962 848 4,239 Total Liabilities 489,364 475,137 488,771 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 91,484 90,371 87,861 Retained earnings 803,948 773,353 762,489 Treasury stock, at cost, 13,674,222 shares, 13,874,787 shares and 13,874,425 shares, respectively ( 212,665 ) ( 215,138 ) ( 215,102 ) Total Shareholders’ Equity 683,177 648,996 635,658 Total Liabilities and Shareholders’ Equity $ 1,172,541 $ 1,124,133 $ 1,124,429 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 November 1, 2025 Thirteen Weeks Ended November 2, 2024 Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Net sales $ 297,155 $ 306,885 $ 881,258 $ 939,946 Cost of sales (including buying, distribution and occupancy costs) 185,318 196,503 554,836 602,821 Gross profit 111,837 110,382 326,422 337,125 Selling, general and administrative expenses 93,214 85,853 270,606 260,010 Operating income 18,623 24,529 55,816 77,115 Interest income ( 1,101 ) ( 1,148 ) ( 2,986 ) ( 2,623 ) Interest expense 78 139 233 412 Income before income taxes 19,646 25,538 58,569 79,326 Income tax expense 5,000 6,296 15,355 20,225 Net income $ 14,646 $ 19,242 $ 43,214 $ 59,101 Net income per share: Basic $ 0.54 $ 0.71 $ 1.58 $ 2.18 Diluted $ 0.53 $ 0.70 $ 1.57 $ 2.15 Weighted average shares: Basic 27,344 27,161 27,305 27,154 Diluted 27,597 27,565 27,513 27,488 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 August 2, 2025 41,049 ( 13,676 ) $ 410 $ 89,462 $ 793,517 $ ( 212,699 ) $ 670,690 Dividends declared ($ 0.150 per share) ( 4,215 ) ( 4,215 ) Employee stock purchase plan purchases 2 4 34 38 Stock-based compensation expense 2,018 2,018 Net income 14,646 14,646 Balance at November 1, 2025 41,049 ( 13,674 ) $ 410 $ 91,484 $ 803,948 $ ( 212,665 ) $ 683,177 Balance at August 3, 2024 41,049 ( 13,875 ) $ 410 $ 86,208 $ 746,996 $ ( 215,119 ) $ 618,495 Dividends declared ($ 0.135 per share) ( 3,749 ) ( 3,749 ) Employee stock purchase plan purchases 1 23 17 40 Stock-based compensation expense 1,630 1,630 Net income 19,242 19,242 Balance at November 2, 2024 41,049 ( 13,874 ) $ 410 $ 87,861 $ 762,489 $ ( 215,102 ) $ 635,658 Thirty-nine 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 ($ 0.45 per share) ( 12,619 ) ( 12,619 ) Employee stock purchase plan purchases 8 13 122 135 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 5,664 5,664 Net income 43,214 43,214 Balance at November 1, 2025 41,049 ( 13,674 ) $ 410 $ 91,484 $ 803,948 $ ( 212,665 ) $ 683,177 Balance at February 3, 2024 41,049 ( 13,919 ) $ 410 $ 83,738 $ 714,647 $ ( 215,406 ) $ 583,389 Dividends declared ($ 0.405 per share) ( 11,259 ) ( 11,259 ) Employee stock purchase plan purchases 5 55 77 132 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 4,983 4,983 Net income 59,101 59,101 Balance at November 2, 2024 41,049 ( 13,874 ) $ 410 $ 87,861 $ 762,489 $ ( 215,102 ) $ 635,658 See notes to Condensed Consolidated Financial Statements. 5 SHOE CARNIVAL, INC. CONDENSED CONSOLIDAT ED STATEMENTS OF CASH FLOWS Unaudited (In thousands) Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Cash Flows From Operating Activities Net income $ 43,214 $ 59,101 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,345 22,762 Stock-based compensation 5,664 5,204 Loss (Gain) on retirement and impairment of assets, net 1,808 ( 415 ) Deferred income taxes 6,324 ( 676 ) Non-cash operating lease expense 44,100 41,790 Other 852 1,270 Changes in operating assets and liabilities: Accounts receivable 1,923 ( 3,720 ) Merchandise inventories ( 49,691 ) ( 18,563 ) Operating leases ( 46,680 ) ( 40,139 ) Accounts payable and accrued liabilities 12,669 ( 8,714 ) Other ( 8,269 ) 188 Net cash provided by operating activities 37,259 58,088 Cash Flows From Investing Activities Purchases of property and equipment ( 38,334 ) ( 24,778 ) Investments in marketable securities ( 1,995 ) ( 502 ) Sales of marketable securities and other 3,470 1,406 Acquisition, net of cash acquired 0 ( 44,384 ) Net cash used in investing activities ( 36,859 ) ( 68,258 ) Cash Flows From Financing Activities Proceeds from issuance of stock 135 132 Dividends paid ( 12,633 ) ( 11,039 ) Shares surrendered by employees to pay taxes on stock-based compensation awards ( 2,213 ) ( 688 ) Net cash used in financing activities ( 14,711 ) ( 11,595 ) Net decrease in cash and cash equivalents ( 14,311 ) ( 21,765 ) Cash and cash equivalents at beginning of period 108,680 99,000 Cash and cash equivalents at end of period $ 94,369 $ 77,235 Supplemental disclosures of cash flow information: Capital expenditures incurred but not yet paid $ 2,993 $ 3,201 Dividends declared but not yet paid $ 613 $ 499 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, 2024, 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 $ 21.1 million and $ 60.1 million in the thirteen and thirty-nine weeks ended November 1, 2025, respectively, $ 22.3 million in the thirteen weeks ended November 2, 2024 and $ 63.9 million from February 13, 2024 through November 2, 2024. For the thirteen and thirty-nine weeks ended November 2, 2024, acquisition-related costs of $ 121,000 and $ 539,000 , 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 thirty-nine weeks ended November 1, 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 November 1, 2025 November 2, 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 $ 14,646 27,344 $ 0.54 $ 19,242 27,161 $ 0.71 Diluted Net Income per Share: Net income $ 14,646 $ 19,242 Conversion of stock-based compensation arrangements 0 253 0 404 Net income available for diluted common shares and diluted net income per share $ 14,646 27,597 $ 0.53 $ 19,242 27,565 $ 0.70 Thirty-nine Weeks Ended November 1, 2025 November 2, 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 $ 43,214 27,305 $ 1.58 $ 59,101 27,154 $ 2.18 Diluted Net Income per Share: Net income $ 43,214 $ 59,101 Conversion of stock-based compensation arrangements 0 208 0 334 Net income available for diluted common shares and diluted net income per share $ 43,214 27,513 $ 1.57 $ 59,101 27,488 $ 2.15 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. 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 thirty-nine weeks ended November 1, 2025 and November 2, 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. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the "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 9 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 thirty-nine weeks ended November 1, 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. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). The guidance provides targeted improvements to the accounting for internal-use software. The guidance is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The amendments in the ASU can be applied on a prospective transition approach, a modified transition approach that is based on the status of the project and whether software costs were capitalized before the date of adoption, or a retrospective transition approach. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and related disclosures. Note 5 - Fair Value Measurements Financial Instruments The following table presents financial instruments that are measured at fair value on a recurring basis at November 1, 2025, February 1, 2025 and November 2, 2024: Fair Value Measurements (In thousands) Level 1 Level 2 Level 3 Total As of November 1, 2025 Cash equivalents - money market mutual funds $ 82,944 $ 0 $ 0 $ 82,944 Marketable securities - mutual funds that fund deferred compensation 13,294 0 0 13,294 Total $ 96,238 $ 0 $ 0 $ 96,238 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 November 2, 2024 Cash equivalents - money market mutual funds $ 65,529 $ 0 $ 0 $ 65,529 Marketable securities - mutual funds that fund deferred compensation 13,866 0 0 13,866 Total $ 79,395 $ 0 $ 0 $ 79,395 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 November 1, 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. 10 Contingent Consideration The following table presents liabilities that are measured at fair value on a recurring basis at November 1, 2025, February 1, 2025 and November 2, 2024: Fair Value Measurements (In thousands) Level 1 Level 2 Level 3 Total As of November 1, 2025 Contingent consideration $ 0 $ 0 $ 412 $ 412 Total $ 0 $ 0 $ 412 $ 412 As of February 1, 2025 Contingent consideration $ 0 $ 0 $ 395 $ 395 Total $ 0 $ 0 $ 395 $ 395 As of November 2, 2024 Contingent consideration $ 0 $ 0 $ 3,793 $ 3,793 Total $ 0 $ 0 $ 3,793 $ 3,793 See Note 2 — “Acquisition of Rogan Shoes” for additional discussion related to our contingent consideration. 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) November 1, 2025 February 1, 2025 November 2, 2024 Deferred compensation plan current liabilities $ 2,072 $ 4,259 $ 193 Deferred compensation plan long-term liabilities 10,988 10,011 13,449 Total deferred compensation plan liabilities $ 13,060 $ 14,270 $ 13,642 Marketable securities - mutual funds that fund deferred compensation $ 13,294 $ 14,432 $ 13,866 (In thousands) Thirteen Weeks Ended November 1, 2025 Thirteen Weeks Ended November 2, 2024 Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Deferred compensation liabilities Employer contributions, net $ 65 $ 83 $ 244 $ 234 Investment earnings 641 632 929 1,214 Marketable Securities Mark-to-market gains (1) ( 596 ) ( 585 ) ( 882 ) ( 1,169 ) Net deferred compensation expense $ 110 $ 130 $ 291 $ 279 (1) Included in the mark-to-market activity related to equity securities still held at quarter-end, we recognized unrealized gains of $ 56,000 and $ 568,000 for the thirteen weeks ended November 1, 2025 and November 2, 2024, respectively, and unrealized gains of $ 865,000 and $ 1.1 million for the thirty-nine weeks ended November 1, 2025 and November 2, 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 thirty-nine weeks ended November 1, 2025 or the thirty-nine weeks ended November 2, 2024 . 11 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 thirty-nine weeks ended November 1, 2025 and November 2, 2024, stock-based compensation expense was comprised of the following: (In thousands) Thirteen Weeks Ended November 1, 2025 Thirteen Weeks Ended November 2, 2024 Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Share-settled equity awards $ 2,011 $ 1,623 $ 5,640 $ 4,926 Stock appreciation rights 0 0 0 221 Employee Stock Purchase Plan 7 7 24 57 Total stock-based compensation expense $ 2,018 $ 1,630 $ 5,664 $ 5,204 Income tax effect at statutory rates $ ( 491 ) $ ( 397 ) $ ( 1,377 ) $ ( 1,266 ) Additional income tax (benefit) expense on vesting of share-settled awards $ ( 3 ) $ 0 $ 466 $ ( 109 ) As of November 1, 2025 , approximately $ 10.9 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 1.6 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 436,031 21.61 Vested ( 259,725 ) 28.79 Forfeited ( 59,113 ) 29.47 Outstanding at November 1, 2025 812,452 $ 25.68 The total fair value at grant date of restricted stock units and performance stock units that vested during the thirty-nine weeks ended November 1, 2025 and November 2, 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 thirty-nine weeks ended November 2, 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 November 1, 2025 29,182 $ 18.85 The total fair value at grant date of restricted stock and other stock awards that vested during the thirty-nine weeks ended November 1, 2025 was $ 100,000 . No restricted stock or other stock awards vested during the thirty-nine weeks ended November 2, 2024. The weighted-average grant date fair value of restricted stock awards granted during the thirty-nine weeks ended November 2, 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 thirty-nine weeks ended November 1, 2025 and November 2, 2024 were as follows: (In thousands) Thirteen Weeks Ended November 1, 2025 Thirteen Weeks Ended November 2, 2024 Non-Athletics: Women’s $ 62,054 21 % $ 65,008 21 % Men’s 48,650 16 52,180 17 Children’s 18,247 6 19,963 6 Total 128,951 43 137,151 44 Athletics: Women’s 50,952 17 51,005 17 Men’s 53,241 18 53,599 17 Children’s 46,775 16 46,202 15 Total 150,968 51 150,806 49 Accessories 15,743 5 17,346 6 Other 1,493 1 1,582 1 Total $ 297,155 100 % $ 306,885 100 % (In thousands) Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Non-Athletics: Women’s $ 203,446 23 % $ 226,821 24 % Men’s 152,609 17 160,036 17 Children’s 57,413 7 64,602 7 Total 413,468 47 451,459 48 Athletics: Women’s 146,476 17 150,836 16 Men’s 158,216 18 162,384 17 Children’s 114,446 13 119,738 13 Total 419,138 48 432,958 46 Accessories 45,050 5 51,230 5 Other 3,602 0 4,299 1 Total $ 881,258 100 % $ 939,946 100 % 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 November 1, 2025, February 1, 2025 or November 2, 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 November 1, 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 November 2, 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 November 1, 2025, February 1, 2025 and November 2, 2024 , approximately $ 1.8 million, $ 2.3 million and $ 2.4 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and Other Liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two 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 thirty-nine weeks ended November 1, 2025 , approximately $ 1.1 million and $ 3.1 million, respectively, of loyalty rewards were recognized in Net Sales. During the thirteen and thirty-nine weeks ended November 2, 2024 , approximately $ 943,000 and $ 2.5 million, respectively, of loyalty rewards were recognized in Net Sales . At November 1, 2025, February 1, 2025 and November 2, 2024 , approximately $ 711,000 , $ 564,000 and $ 613,000 , 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 thirty-nine weeks ended November 1, 2025 and November 2, 2024 were as follows: (In thousands) Thirteen Weeks Ended November 1, 2025 Thirteen Weeks Ended November 2, 2024 Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Net sales $ 297,155 $ 306,885 $ 881,258 $ 939,946 Less: Merchandise & delivery costs (1) 162,610 173,447 486,279 535,265 Store occupancy costs 22,708 23,056 68,557 67,556 Store expenses (2) 41,933 41,554 123,671 125,138 E-commerce expenses (3) 4,032 4,735 12,140 14,303 Advertising 18,705 15,084 48,232 41,233 Store depreciation and other selling expenses (4) 10,893 10,036 32,464 29,530 General and administrative expenses (5) 17,651 14,444 54,099 49,806 Interest income ( 1,101 ) ( 1,148 ) ( 2,986 ) ( 2,623 ) Interest expense 78 139 233 412 Income tax expense 5,000 6,296 15,355 20,225 Net income $ 14,646 $ 19,242 $ 43,214 $ 59,101 (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 November 1, 2025, February 1, 2025 or November 2, 2024. 15 Lease costs, including other related occupancy costs, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024: (In thousands) Thirteen Weeks Ended November 1, 2025 Thirteen Weeks Ended November 2, 2024 Thirty-nine Weeks Ended November 1, 2025 Thirty-nine Weeks Ended November 2, 2024 Operating lease cost $ 17,872 $ 17,889 $ 53,550 $ 52,375 Variable lease cost Occupancy costs 5,502 5,785 17,040 17,287 Percentage rent and other variable lease costs 239 220 686 492 Finance lease cost Amortization of leased assets 8 30 25 45 Interest on lease liabilities 2 2 7 8 Total $ 23,623 $ 23,926 $ 71,308 $ 70,207 16