Item 1. Business
ITEM 1. BUSINESS
Our Company
Shoe Carnival, Inc. is one of the nation’s largest family footwear retailers, providing the convenience of shopping at any of our store locations, our mobile app or online. We offer customers a broad assortment of moderately priced dress, casual and athletic footwear for men, women and children with an emphasis on national name brands. We differentiate our retail concept from our competitors by our distinctive, fun and promotional marketing efforts. On average, our physical stores are approximately 10,800 square feet and carry inventory of approximately 25,200 pairs of shoes per location. Including e-commerce sales in close proximity to a physical store, our physical stores each generated an average of $2.5 million in annual sales in fiscal 2020. As of January 30, 2021, we operated 383 stores in 35 states and Puerto Rico and offered online shopping at www.shoecarnival.com.
We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to “Shoe Carnival,” “we,” “us,” “our” and the “Company” in this Annual Report on Form 10-K refer to Shoe Carnival, Inc. and its subsidiaries.
Key Competitive Strengths
We believe our financial success is due to a number of key competitive strengths that make Shoe Carnival a destination of choice for today’s retail consumer.
Distinctive shopping experience
Our stores combine competitive pricing with a promotional, high-energy in-store environment that encourages customer participation and injects fun and excitement into every shopping experience. Unique features of our store experience include upbeat music, opportunities for our customer to spin our iconic spin-n-win wheel, and a mic-person who runs specials for customers shopping at our stores. These specials include contests and games and hot deals of the moment to encourage customers to take immediate advantage of our promotional pricing. Our staff is dedicated to customer service and assists and educates customers with the features and location of merchandise, as well as finding sizes, styles and colors. We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods. A similar customer experience is reflected in our e-commerce platform through special promotions and limited time sales.
Broad merchandise assortment
Our objective is to be the destination retailer-of-choice for value-priced, on-trend branded and private label footwear. Our product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family. Our average store carries shoes in four general categories – women’s, men’s, children’s and athletics, as well as a broad range of accessories such as socks, belts, shoe care items, handbags, hats, sport bags, backpacks, water bottles and wallets. Footwear is organized by category and brand, creating strong brand statements within the aisles. These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store. Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle statements by grouping similar footwear from multiple vendors. Over 100 of our physical stores have strongly branded Nike shops that highlight Nike products within the stores, and we expect to add more Nike shops to our physical stores through 2023. Our e-commerce platform offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and colors that may not be available in all stores.
Value pricing for our customers
Our customer is primarily a moderate income, value-conscious consumer seeking name brand footwear across all ages. We believe that by offering a wide selection of popular styles of name brand and private label merchandise at competitive prices, we generate broad customer appeal. Additionally, the time-conscious customer appreciates the convenience of one-stop shopping for the entire family, whether this occurs at any of our store locations, online at
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www. shoecarnival.com or through our mobile app. Our fun and promotional shopping environment adds to our value - priced reputation.
Efficient store level cost structure
Our cost-efficient store operations and real estate strategy enable us to price products competitively. We achieve low labor costs by housing merchandise directly on the selling floor in an open stock format, allowing customers to serve themselves, if they choose. This reduces the staffing required to assist customers and reduces store level labor costs as a percentage of sales. We locate stores predominantly in open-air shopping centers in order to take advantage of lower occupancy costs and maximize our exposure to value-conscious shoppers. We continue to invest in our existing store locations and expect to remodel and refresh many of our physical stores over the next three fiscal years.
Heavy reliance on information technology
We have invested significant resources in information technology. Our proprietary inventory management and advanced point-of-sale (“POS”) systems provide corporate management, buyers and store managers with the timely information necessary to monitor and control all phases of operations. The POS provides, in addition to other features, full price management (including price look-up), promotion tracking capabilities (in support of the spontaneous nature of the in-store price promotions), real-time sales and cost of sales by product category at the store level and customer tracking. Using the POS, store managers are able to monitor sales and cost of sales on a real-time basis throughout the day. Reacting to sales trends, our mic-people use the POS to choose from among a number of product promotions supplied by our centralized merchandising staff.
Our centralized network connects our corporate office to our distribution center and retail stores via a wide area network, providing up-to-date sales and inventory information as required. Our data warehouse enables our merchandising and store operations staff to analyze sales, margin and inventory levels by location, by day, down to the size of shoe. Using this information, our merchandise managers meet regularly with vendors to compare their product sales and margins and return on inventory investment against previously stated objectives. We believe timely access to key business data has enabled us to drive our comparable store sales, manage our markdown activity and improve inventory turnover.
In fiscal 2020, we implemented new Traffic, Warehouse and Order Management Systems (“TMS”, “WMS”, “OMS”, respectively). We believe these cloud-based, software-as-a-service arrangements will enable us to meet the complex demands of multi-channel fulfillment, enhance our supply chain, position us for long-term growth and ultimately enhance customer satisfaction and convenience in an increasingly competitive environment.
Disciplined Approach to Capital Management
We remain focused on funding our operations without leverage. We ended fiscal 2020 with no debt and $106.5 million of cash and cash equivalents. Over the last five years, we have had no debt outstanding and a cash and cash equivalents balance of at least $48 million at the end of each fiscal year. We believe this approach increases our ability to make impactful long-term decisions and enhances our stakeholder relationships. Over the last five fiscal years we have returned approximately $181.6 million to our shareholders through share repurchases and dividends.
Growth Strategy
Store portfolio
Increasing market penetration by opening new stores has historically been a key component of our growth strategy, and we continue to focus on generating positive long-term financial performance for our store portfolio. We opened four new stores in fiscal 2020 and expect to open a limited number of new stores in existing markets in fiscal 2021. We believe our current store footprint provides for growth nationwide as well as fill-in opportunities within existing markets. We expect to pursue opportunities for store growth across large and mid-size markets as we leverage customer data from our customer relationship management (“CRM”) program and more attractive real estate options become available. Furthermore, our future store growth may continue to be impacted by the economic uncertainty
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associated with the COVID-19 pandemic. Our CRM program is more fully described below under “Multi-Channel Strategy – Customer Relationship Management.”
Our ability to cluster stores has been critical to the success of opening new stores in larger markets or geographic areas. In large markets (populations greater than 400,000), clustering involves opening two or more stores at approximately the same time. In smaller markets that can only support a single store, clustering involves seeking locations in reasonably close proximity to other existing markets. This strategy creates cost efficiencies by enabling us to leverage store expenses with respect to advertising, distribution and management costs. We believe the advantages of clustering stores in existing markets will lead to cost efficiencies and overall incremental sales gains that should more than offset any adverse effect on sales of existing stores.
We continuously analyze our portfolio of stores, with a concentration on underperforming stores, to meet our long-term goal of increasing shareholder value through increasing operating income. Our objective is to identify and address underperforming stores that produce low or negative contribution and either renegotiate lease terms, relocate or close those stores. Based on this analysis, we closed 13 stores in fiscal 2020 and expect to close nine stores in fiscal 2021. Even though store closings could reduce our overall net sales volume, we believe this strategy will realize long-term improvement in operating income and diluted net income per share.
As of January 30, 2021, we operated 383 stores located across 35 states and Puerto Rico. Our stores averaged approximately 10,800 square feet, ranging in size from 4,000 to 26,000 square feet. New store sizes typically depend upon location and population base, and our stores are predominantly located in open-air shopping centers. Our traditional store prototype typically utilizes between 8,000 and 12,000 square feet of leased area. We also utilize scalable store prototypes that reflect the diverse population densities of our markets. These prototypes utilize a wide range of leased space based on sales potential and opportunistic space availability. The sales area is approximately 85% of the typical gross store footprint.
Historical Store Count
Fiscal Years
2020
2019
2018
2017
2016
Stores open at the beginning of the year
392
397
408
415
405
New store openings
4
1
3
19
19
Store closings
(13
)
(6
)
(14
)
(26
)
(9
)
Stores open at the end of the year
383
392
397
408
415
Stores relocated
0
4
1
3
3
Percentage of store base remodeled
<1%
3
%
1
%
3
%
4
%
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The following table identifies the number of our stores in each state and Puerto Rico as of January 30, 2021:
State/Territory
State/Territory
Alabama
10
New Jersey
2
Arkansas
10
New York
3
Arizona
3
North Carolina
18
Colorado
4
North Dakota
3
Delaware
1
Ohio
20
Florida
30
Oklahoma
7
Georgia
16
Pennsylvania
12
Idaho
4
Puerto Rico
5
Iowa
11
South Carolina
10
Illinois
31
South Dakota
2
Indiana
28
Tennessee
18
Kansas
5
Texas
47
Kentucky
12
Utah
2
Louisiana
8
Virginia
7
Michigan
14
Wisconsin
3
Missouri
22
West Virginia
5
Mississippi
6
Wyoming
1
Montana
1
Total Stores
383
Nebraska
2
We lease all store locations, as we believe the flexibility afforded by leasing allows us to avoid the inherent risks of owning real estate, particularly with respect to underperforming stores. Before entering a new market, we perform a market, demographic and competition analysis to evaluate the suitability of the potential market. Potential store site selection criteria include, among other factors, market demographics, traffic counts, tenant mix, visibility within the center and from major thoroughfares, overall retail activity of the area and proposed lease terms. The time required to open a store after signing a lease depends primarily upon the property owner’s ability to deliver the premises. After we accept the premises from the property owner, we can generally open a turnkey store within 60 days and open an “as-is” store in up to 115 days. A turnkey store is generally available for immediate use from the landlord, as the landlord performs nearly all aspects of construction and delivers the store in a condition ready for fixtures. There are typically minimal tenant improvement allowances negotiated with landlords for turnkey stores. An “as-is” store typically requires more significant capital investment by us, as the landlord performs minimal construction and delivers the space “as-is” while representing that the location is free of hazardous materials. There are typically significant tenant improvement allowances negotiated with landlords for “as-is” stores.
To do our part in helping to prevent the rapid spread of COVID-19 and to align with the evolving guidance from federal, state and local governments and health officials , we temporarily closed all of our stores across the United States and Puerto Rico effective March 19, 2020. We began reopening stores in accordance with applicable public health guidelines in late April 2020. By the beginning of our second fiscal quarter, approximately 50% of our stores were reopened, and by early June, substantially all of our stores had reopened. Our e-commerce platform has been fully operational during the pandemic, with e-commerce orders generally fulfilled by our store locations. As of January 30, 2021, we do not have any stores closed due to the COVID-19 pandemic. However, we continue to closely monitor the impact of the COVID-19 pandemic on all facets of our business and will take the necessary steps to ensure the health and safety of our associates and customers. This could include future, temporary store closures or modifications to our normal store operating processes.
Multi-Channel Strategy
Our goal is to be a world class multi-channel retailer. The foundation of our multi-channel strategy is connecting customers with our wide assortment of store inventory through multiple channels, while maintaining a personalized, seamless customer service experience. Our customer’s shopping journey bridges multiple devices and touchpoints. We are committed to providing an incomparable customer experience across all channels and believe that our ongoing multi-channel initiatives represent the cornerstone for our long-term growth and are aligned with rapidly
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changing consumer behavior. These initiatives are an integral part of expanding our multi-channel footprint and creating opportunities to connect with our customers in new ways.
Customer Relationship Management
Our CRM program continues to provide valuable customer insights to our business, resulting in more efficient and effective marketing outreach. CRM provides our marketing, merchandising, analytics and real estate teams with a holistic view of our customer’s shopping behaviors and forms the foundation of our digital marketing efforts and our Shoe Perks loyalty program (“Shoe Perks”). Our view into customer data allows us to more effectively communicate with our customers on a segmented basis through all owned and paid media channels and tailor the merchandise mix down to a store level. Through transaction data, we gain useful insights into our customers’ shopping habits, including where, when and how they shop our stores and navigate our online presence. Additionally, our CRM program allows us to gain a deeper understanding of the brands and categories that our high-value customers consistently purchase so that we can continue to deliver strong performance at a geographic and store level.
Our CRM program allows us to drive customer retention by delivering each customer more individualized shopping opportunities and experiences and aids in gaining a better understanding of our existing customer base as well as identifying new customers. We expect segmentation and activation of our high-value customers through data analysis and targeting the broader market of ‘look-a-like’ customers to play a key role in our growth.
Customers who enroll in Shoe Perks or register on our website receive personalized e-mail communications from us. These communications afford us additional opportunities to highlight our broad product assortment and promotions. Shoe Perks provides customers with a heightened shopping experience, which includes exclusive offers and rewards that are earned by making purchases either in-store or online and through participating in other point earning opportunities that facilitate engagement with our brand.
We remain highly focused on expanding our Shoe Perks enrollment. In fiscal 2020, we added 2.3 million new members, which brought total Shoe Perks membership to 26.3 million members at the end of fiscal 2020, an approximate 10% increase over fiscal 2019. Purchases from Shoe Perks members were approximately 67% of our comparable net sales. We believe our Shoe Perks program affords us tremendous opportunity to communicate, build relationships, and engage with our most loyal shoppers and increase our customer touch points, which we believe will result in long-term sales gains. Our most loyal customers, those who qualify for our “Gold” tier, receive additional rewards and incentives. The Gold tier represents approximately 10% of our members, and the average transaction value for these customers was approximately 40% higher than non-Gold tier Shoe Perks members in fiscal 2020.
E-commerce Platform
Our e-commerce platform is an extension of our physical stores and is designed to improve the customer journey by providing a more relevant and personalized shopping experience. Our e-commerce platform played a critical role in fiscal 2020 due to the challenges associated with the COVID-19 pandemic. In fiscal 2020, our customers embraced our e-commerce platform as demand for online shopping surged, and we exceeded our e-commerce sales expectations. During fiscal 2020, we also added a new online payment platform, which we believe helped to generate a record increase in multi-channel sales. This payment solution allows customers to enjoy flexible payment options for their purchases, such as separating purchases into multiple, interest free payments. E-commerce sales represented approximately 19% of our merchandise sales in fiscal 2020 and 6% of our merchandise sales in fiscal 2019.
Ship-From-Store
Our Ship-From-Store program is a core element of our multi-channel strategy. This program allows stores to fulfill online orders and has been implemented on a chain-wide basis (with limited exceptions). By fulfilling e-commerce orders from our store level inventory, we are able to minimize out-of-stocks, offer our customers an expanded online assortment and leverage store level inventory and overhead. E-commerce orders are also fulfilled from our distribution center in Evansville, Indiana.
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Vendor Drop-Ship Program
We maintain a vendor drop-ship program with select business partners. This program offers our customers an expanded online assortment of styles and colors that we do not carry in-store. While our customers benefit from expanded item assortment, the functionality of this program is seamless, and our customers’ online experience is not impacted by the vendor drop-ship fulfillment option. We benefit from this program by not having to make a capital investment in the expanded inventory assortment, which is carried and fulfilled by our business partners participating in this program.
Buy Online, Pick Up In Store
Another key element of our multi-channel strategy is our “buy online, pick up in store” program. Not only can our customers choose to pick up their e-commerce orders in-store, but they can now shop their favorite or nearby stores online and only see the product that is available in any given store. This program provides the convenience of local pickup for our customers with the added benefit of driving traffic back to our stores.
Shoes 2U
Our Shoes 2U program enables us to ship product from any store to a customer’s home or store of their choice if they are unable to find the size, color or style of a shoe in the store in which they are shopping. This creates an endless aisle experience for our customers in which our chain-wide inventory is accessible to any store customer.
Order Management System
In fiscal 2020 we launched a cloud-based OMS, which will enhance the operational efficiency of our direct-to-consumer programs. Combined with our new WMS, our new OMS allows us to optimize the allocation of e-commerce and Shoes 2U orders and further leverage our distribution center. Moreover, with our new OMS, we have seamless orchestration of orders across the Company as well as enhanced visibility of available inventory and insight into customer transactions.
Merchandise
Critical to our success is maintaining fresh, fashionable merchandise at moderate prices. Our buyers stay in touch with evolving fashion trends and adjust growth strategies based on these trends. This is accomplished by subscribing to an industry leading trend service, shopping fashion-leading markets, attending national trade shows, gathering vendor input and monitoring the current styles shown in leading fashion and lifestyle magazines.
Our buyers and planners have years of experience and in-depth knowledge of our customers and the markets in which we operate. This helps us select our assortment and quantities in order to manage and allocate inventories at the store level. The mix of merchandise and the brands offered in a particular store reflect the demographics of each market, climate and seasonality, among other factors. Management encourages store operations personnel to provide input to our merchandising staff regarding market specific fashion trends. Our e-commerce platform offers customers an opportunity to choose from a large selection of products in all of the same categories of footwear and introduces our concept to consumers who are new to Shoe Carnival, in both existing and new markets.
In fiscal 2020, we commenced implementation of a new merchandise planning system that will provide a unified strategic planning and budgeting process that is supported by various solutions, including strategic and assortment planning, store allocation and replenishment and in-season management. This cloud-based platform is a multi-year project. We believe this collaborative platform will unify our buy plans, optimize inventory levels, help achieve more sales at higher margins and allow us to set goals for multiple channels and formats common in today’s competitive environment.
Our stores and e-commerce platform offer a broad assortment of current-season, name brand footwear, supplemented with private label merchandise and accessories. We purchase merchandise from 177 footwear vendors. Management of the purchasing function is the responsibility of our Executive Vice President – Chief Merchandising Officer. Our buyers maintain ongoing communication with our vendors and provide feedback to our vendors on sales, profitability and current demand for their products. We adjust future purchasing decisions based upon the results of this analysis. In fiscal 2020, two branded suppliers, Nike, Inc. and Skechers USA, Inc.,
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collectivel y accounted for approximately 43 % of our net sales. Nike, Inc. accounted for approximately 33 % and Skechers USA, Inc. accounted for approximately 10 % of our net sales , respectively . Name brand suppliers also provide us with cooperative advertising and visual merchandising funds. As is common in the industry, we do not have any long ‑term contracts with our suppliers.
Initial pricing levels are typically established in accordance with the manufacturer’s suggested retail pricing structure. Subsequent to this initial pricing, our buying staff manages our markdown cadence based on product-specific sell-through rates to achieve liquidation of inventory within the natural lifecycle of the product. We emphasize our value proposition to customers by combining current season name brand products with marketing promotions. These promotions include both advertised limited time sale offerings in addition to in-store and online timed specials.
The table below sets forth our percentage of merchandise sales by product category.
Fiscal Years
2020
2019
2018
2017
2016
Non-Athletics:
Women's
22
%
25
%
24
%
24
%
26
%
Men's
14
14
14
14
14
Children's
5
5
5
5
5
Total
41
44
43
43
45
Athletics:
Women's
19
17
18
17
16
Men's
22
20
21
22
22
Children's
13
14
14
14
13
Total
54
51
53
53
51
Accessories
5
5
4
4
4
Total
100
%
100
%
100
%
100
%
100
%
Women’s, men’s and children’s non-athletic footwear categories are further divided into dress, casual, sport, sandals and boots. We classify athletic shoes by functionality, such as running, basketball or fitness shoes.
Building Brand Awareness
Our goal is to communicate a consistent brand image across all aspects of our operations and throughout our marketing mix of paid, owned and earned channels. We highlight brands, as well as specific styles of product, using lifestyle and product imagery to showcase the product. The use of digital media continues to grow in importance in our marketing mix, particularly as we leverage data that comes directly from our customers as part of our CRM solution, allowing us to directly communicate with our core customers. In fiscal 2020, we invested more heavily in targeted digital advertising to drive customers to our e-commerce platform. We believe this was an effective way to counter the pandemic and the related shifts in back-to-school shopping. Approximately 70% of our total advertising budget in fiscal 2020 was directed to digital media. Television, radio, print media (including inserts, direct mail and newspaper advertising) and outdoor advertising accounted for the balance of our total advertising budget.
We strive to make each store opening a major retail event. Major promotions during grand openings and peak selling periods feature contests and prize giveaways. We believe our grand openings help establish a high-energy, promotional atmosphere that develops a loyal, repeat customer base and generates word of mouth advertising.
Distribution
We operate a single 410,000 square foot distribution center located in Evansville, Indiana. Our facility can support the processing and distribution needs for up to 460 stores based on our current configuration. We have the right to expand the facility by 200,000 square feet, which would provide us processing capacity to support approximately 650 stores. We lease the facility from a third party, which expires in 2034.
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Our distribution center is equipped with state-of-the-art processing and product movement equipment. The facility utilizes cross docking/store replenishment and redistribution methods to fill store product requirements. These methods may include count verification, price and bar code labeling of each unit (when not performed by the manufacturer), redistribution of an order into size assortments (when not performed by the manufacturer) and allocation of shipments to individual stores. Throughout packing, allocating, storing and shipping, our distribution process is essentially paperless. Merchandise is typically shipped to each store location once per week. For stores within the continental United States, a dedicated carrier, with occasional use of common carriers, handles the majority of shipments. Our shipments to Puerto Rico are loaded for containerized overseas shipment, with final delivery by a third-party provider.
During fiscal 2020 we implemented a new WMS in order to optimize our supply chain and drive warehouse efficiency. This new platform was integrated with our existing systems and affords us the flexibility to keep pace with changing customer buying habits.
Competition
The retail footwear business is highly competitive. We believe the principal competitive factors in our industry are merchandise selection, price, fashion, quality, location, shopping environment and service. We compete with department stores, shoe stores, sporting goods stores, e-commerce retailers and mass merchandisers. Our specific competitors vary from market to market. We compete with most department stores and traditional shoe stores by offering competitive prices. We compete with off-price retailers, mass merchandisers and discount stores by offering a wider and deeper selection of merchandise. Many of our competitors are significantly larger and have substantially greater resources than we do. However, we believe that our distinctive retail format, in combination with our wide merchandise selection, competitive prices and low operating costs, enables us to compete effectively.
Store Operations
Management of store operations is the responsibility of our Executive Vice President - Chief Retail Operations Officer, who is assisted by divisional vice presidents, district managers and individual store general managers. Generally, each store has a general manager and up to three store managers, depending on sales volume. Store operations personnel make certain merchandising decisions necessary to maximize sales and profits primarily through merchandise placement, signage and timely clearance of slower selling items. Administrative functions are centralized at our corporate headquarters. These functions include accounting, strategic sourcing, store maintenance, information systems, marketing, human resources, distribution and pricing. Management oversight for e-commerce is also located at our corporate headquarters.
Culture and Human Capital Management
We have intentionally built an employee-centric, customer-focused organization designed to compete at the highest levels in the retail industry. Our commitment to, and investment in, a strong performance culture is paramount to our long-term sustainability and success. Forbes Magazine recently recognized the quality of our employee-centric culture by naming us one of America’s Best Midsize Employers for 2019.
Our employee-centric culture aided us during the COVID-19 pandemic. As non-essential retailers were required to close to the public, many of our competitors decided to furlough a significant number of employees. We, however, took a different route, finding innovative ways to keep our associates in full employment. This strategy positively impacted our associates, their families, and the communities we serve. In addition, this decision enabled us to rapidly reopen our stores in a safe manner as soon as we were permitted to do so.
Workforce Diversity and Inclusion
We serve a diverse customer base and seek diversity in and among our workforce in all areas, from our stores to our distribution center and our corporate office. We believe that the diversity of our workforce and management is a tremendous asset. We are firmly committed to providing equal opportunities in all aspects of employment and believe that all individuals should be treated with respect and dignity. Diversity is an important element in our
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ongoing annual mandatory training for all employees and managers. We do not tolerate harassment or unlawful discrimination of any kind.
We have clear policies encouraging strong relationships and protecting open lines of communication with management at every level. This, coupled with our non-retaliation policy, encourages employees to raise issues and seek immediate redress of those issues if they should arise.
We understand the value of diversity at all levels, whether of gender, race, ethnicity, background or experience. As of January 30, 2021, our overall workforce identified as 66% female and 34% male. Our broad-based leadership team, including those who manage and lead our stores and those who lead our company, identified as 59% female and 41% male as of our fiscal 2020 year end. With respect to ethnicity, our broad-based leadership team identified as 61% Caucasian and 39% non-Caucasian as of January 30, 2021. The diversity of our broad-based leadership team trends with the diversity of our customer base, which based on recent data from our Shoe Perks customer loyalty program, approximates three-quarters Caucasian and one-quarter African American, Hispanic, or Asian and is more female than male.
In our corporate leadership roles (senior director-level employees through our named executive officers), the portion identifying as female has significantly increased over the last three years from 5% to 26%. Our human resources, marketing, and supply chain departments as well as portions of our merchandising and technology departments are led by females.
At the Board level, we are also focused on increasing our diversity. Currently 20% of our non-employee Board members is female. We are currently refreshing our Board and assessing long-term succession as well as the diversity of the Board’s collective skill set. In fiscal 2019, a board member rolled off the Board as his term expired, creating space for new candidates who will enhance our diversity. Our short-term goal is to achieve 40% diversity in our non-employee Board members by the end of fiscal 2021.
Retention
We believe our employee-centric culture not only supports higher levels of execution and performance, but also has led to increased retention of key talent. We take great pride in our store-level training programs that provide the foundation for long-term careers and our ability to promote from within. Currently, all of the general managers who operate our stores and 85% of our district managers who oversee those general managers were trained, developed, and promoted from within. As of January 30, 2021, of our 26 district managers, 81% have been employed by Shoe Carnival for more than 20 years. The average tenure of the general managers who operate our 383 stores was 13 years as of fiscal 2020 year end.
Individuals who comprise our leadership team, which includes our named executive officers, vice presidents and senior director-level employees, have been employed by Shoe Carnival for an average of 18 years.
Employee Benefits
Among the many ways we seek to serve our employees, we offer a complete range of benefits. These include competitive wages and incentives, including stock appreciation rights for mid-level managers; an employee stock purchase plan with a 15% discount off the fair value of our common stock; employer-subsidized medical plans with dental and vision benefits; qualified and unqualified defined contribution plans with employer matching contributions; and merchandise discounts, among other benefits.
Training and Code of Business Conduct and Ethics
We are dedicated to strengthening our culture and execution through ongoing training for all associates. We are uniquely focused on training within our store-level, customer-facing operations. Employees must obtain necessary certifications in order to be responsible for the keys to a store and eventually to become a general manager. Our broad-based training program also engages and educates our employees on the following key topics:
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•
Non-discrimination and anti-harassment, including the value of diversity and awareness of unconscious bias in all aspects of the employment relationship;
•
Cybersecurity awareness and responsibility;
•
Supply chain security; and
•
Business code of conduct.
More information regarding our approach to conducting business responsibly, including our guidelines on discrimination and harassment, can be found in our Code of Business Conduct and Ethics (“Code of Ethics”). Our Code of Ethics applies to all of our Board members, officers and employees, including our principal executive officer, our principal financial officer, and our principal accounting officer. The Code of Ethics is posted on our website at investors.shoecarnival.com/governance/ governance-documents . We intend to disclose any amendments to the Code of Ethics by posting such amendments on our website. In addition, any waivers of the Code of Ethics for our Board members or executive officers will be disclosed in a Current Report on Form 8-K.
Safety of our Employees and Security of our Data
We strive to provide our associates with a safe and healthy work environment. Our Safety Committee works across the Company and with leadership at all levels and regularly reports to management. We evaluate conditions and incidents on an ongoing basis, developing lessons learned and documenting actions taken to safeguard our personnel. We measure OSHA recordable incidents to gauge the success of our safety protocol. During calendar year 2020, we recorded 49 OSHA recordable incidents, an approximate 25% reduction in incidents compared to just two years ago.
Our strategies to address the ever-expanding complexities of protecting customer and employee data and executing our business strategies in an increasingly digital world continue to advance. Our Security Committee monitors and tests compliance with our protocols, provides regular updates to employees and management, and conducts annual training.
Number of Employees
At January 30, 2021, we had approximately 4,700 employees, of which approximately 2,600 were employed on a part-time basis. The number of employees fluctuates during the year primarily due to seasonality. None of our employees are represented by a labor union.
Seasonality
Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores. The timing and actual amount of expense recorded in closing a store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the amount of any lease buyout. Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur closing costs related to the closure of existing stores.
We have three distinct peak selling periods: Easter, back-to-school and Christmas. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year. Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability. Our operating results depend significantly upon the sales generated during these periods.
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Trademarks
We own the following federally registered trademarks and service marks: Shoe Carnival ® and associated trade dress and related logos, Y-NOT? ® , UNR8ED ® , Solanz ® , Shoe Perks ® , SC Work Wear ® , When You Want To 2 ® , A Surprise In Store ® , Shoes 2U ® , Laces for Learning ® and Princess Lacey’s Laces ® . We believe these marks are valuable and, accordingly, we intend to maintain the marks and the related registrations. We are not aware of any pending claims of infringement or other challenges to our right to use these marks.
Environmental
We seek to minimize our impact on the environment and reduce our carbon footprint by actively implementing environmentally-friendly processes throughout our business, including energy efficiency initiatives, waste minimization, and the use of recycled materials within our supply chain. Our most significant areas of focus are fuel and packaging material used to deliver merchandise to our distribution center and stores; the HVAC and lighting systems in our stores, distribution center, and corporate office; and recycling methods.
Compliance with current federal, state and local provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material effect upon our capital expenditures, earnings or competitive position. We anticipate no material capital expenditures for environmental control facilities for our current fiscal year or for the near future.
Available Information
We make available free of charge through the investor relations portion of our website at www.shoecarnival.com our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. We have included our website address throughout this filing as textual references only. The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K.
This Annual Report on Form 10-K filed with the Securities and Exchange Commission, including the financial statements and schedules thereto, without the accompanying exhibits, is available without charge to shareholders, investment professionals and securities analysts upon written request. Requests should be directed to Investor Relations at our corporate address. A list of exhibits is included in this Annual Report on Form 10-K, and exhibits are available from us upon payment to us of the cost of furnishing them.
Information about our Executive Officers
The following table sets forth certain information with respect to our executive officers as of the date of filing this Annual Report on Form 10-K, March 26, 2021:
Name
Age
Position
J. Wayne Weaver
86
Chairman of the Board and Director
Clifton E. Sifford
67
Vice Chairman, Chief Executive Officer and Director
Mark J. Worden
47
President and Chief Customer Officer
W. Kerry Jackson
59
Senior Executive Vice President - Chief Financial and Administrative Officer and Treasurer
Carl N. Scibetta
62
Senior Executive Vice President - Chief Merchandising Officer
Timothy T. Baker
64
Executive Vice President - Chief Retail Operations Officer
Patrick C. Edwards
49
Vice President, Chief Accounting Officer, Corporate Controller and Assistant Secretary
Mr. Weaver has served as Chairman of the Board since March 1988. From 1978 until February 2, 1993, Mr. Weaver had served as President and Chief Executive Officer of Nine West Group, Inc., a designer, developer and marketer of women’s footwear. He has over 50 years of experience in the footwear industry. Mr. Weaver is a former Director of Nine West Group, Inc. Mr. Weaver served as Chairman and Chief Executive Officer of
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Jacksonville Jaguars, LTD, a professional football franchise, until January 2012. Mr. Weaver previously served two terms as a Director of Stein Mart, Inc., a publicly traded chain of off-price retail stores, from June 2014 until March 2016 and from November 2000 until April 2008 .
Mr. Sifford has been employed as Vice Chairman since September 2019 and has served as Chief Executive Officer and a Director since October 2012. Mr. Sifford also served as President from October 2012 to September 2019. Mr. Sifford served as Chief Merchandising Officer from October 2012 to March 2016. From June 2001 to October 2012, Mr. Sifford served as Executive Vice President – General Merchandise Manager and from April 1997 to June 2001, Mr. Sifford served as Senior Vice President – General Merchandise Manager. Prior to joining us, Mr. Sifford served as Merchandise Manager – Shoes for Belk, Inc.
Mr. Worden has been employed as President and Chief Customer Officer since September 2019. From September 2018 to September 2019, Mr. Worden served as Executive Vice President – Chief Strategy and Marketing Officer. Prior to joining us, Mr. Worden led the Northern European region for S. C. Johnson & Son, Inc. (“SC Johnson”), a manufacturer of household cleaning supplies and products, and was responsible for revenue and share growth objectives across six countries from May 2014 to July 2018. Prior to that, Mr. Worden served as Assistant to the Chairman and Chief Executive Officer of SC Johnson from May 2012 to May 2014 and as a Senior Marketing Director from 2009 to 2012. Mr. Worden also served as a Senior Brand Manager at Kimberly-Clark Corporation and held multiple marketing roles across their flagship brands during his tenure there from 2003 through 2009.
Mr. Jackson has been employed as Senior Executive Vice President, Chief Financial and Administrative Officer and Treasurer since September 2019. From October 2012 to September 2019, Mr. Jackson served as Senior Executive Vice President – Chief Operating and Financial Officer and Treasurer. From August 2004 to October 2012, Mr. Jackson served as Executive Vice President – Chief Financial Officer and Treasurer. From June 2001 to August 2004, Mr. Jackson served as Senior Vice President – Chief Financial Officer and Treasurer. From September 1996 to June 2001, Mr. Jackson served as Vice President – Chief Financial Officer and Treasurer. From January 1993 to September 1996, Mr. Jackson served as Vice President – Controller and Chief Accounting Officer. Prior to January 1993, Mr. Jackson held various accounting positions with us. Prior to joining us in 1988, Mr. Jackson was associated with a public accounting firm. He is a Certified Public Accountant.
Mr. Scibetta has been employed as Senior Executive Vice President – Chief Merchandising Officer since March, 2021. From March 2016 to March 2021, Mr. Scibetta serviced as Executive Vice President – Chief Merchandising Officer. From December 2012 to March 2016, Mr. Scibetta served as General Merchandise Manager. Prior to joining us, Mr. Scibetta served as Vice President, Divisional Merchandise Manager– Footwear for Belk, Inc. since 2008. From 2004 to 2007, Mr. Scibetta served as Vice President, Divisional Merchandise Manager – Footwear for Parisian Department Stores. From 1998 to 2000, Mr. Scibetta served as Vice President, Divisional Merchandise Manager for Shoe Corporation of America. Mr. Scibetta began his retail career with Wohl Shoe Company in 1980.
Mr. Baker has been employed as Executive Vice President – Chief Retail Operations Officer since September 2019. From June 2001 to September 2019, Mr. Baker served as Executive Vice President – Store Operations. From March 1994 to June 2001, Mr. Baker served as Senior Vice President – Store Operations. From May 1992 to March 1994, Mr. Baker served as Vice President – Store Operations. Prior to that time, he served as one of our regional managers. From 1983 to June 1989, Mr. Baker held various retail management positions with Payless ShoeSource.
Mr. Edwards has been employed as Vice President, Chief Accounting Officer, Corporate Controller and Assistant Secretary since March 2021. From October 2019 to March 2021, Mr. Edwards served as our Vice President and Corporate Controller and as our Assistant Secretary since December 2019. Prior to joining us, Mr. Edwards was Vice President of Accounting for CenterPoint Energy, Inc. (“CenterPoint”) from February 2019 to August 2019 following its acquisition of Evansville, Indiana-based Vectren Corporation (“Vectren”). For Vectren, Mr. Edwards held various leadership roles in the accounting, audit and finance functions from February 2001 through February 2019, including Vice President and Treasurer from April 2017 to February 2019 and Vice President of Corporate Audit from August 2013 to April 2017. Prior to joining Vectren, Mr. Edwards worked in public accounting. Mr. Edwards is a Certified Public Accountant.
Our executive officers serve at the discretion of the Board of Directors. There is no family relationship between any of our Directors or executive officers.
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Chief Executive Officer Succession
In March 2021, our Board unanimously elected Mr. Worden as our next President and Chief Executive Officer, effective September 30, 2021. Mr. Worden will succeed Mr. Sifford, who will step down as our Chief Executive Officer effective September 30, 2021, but will continue to serve in the role of Vice Chairman of the Board of Directors and, in such role, will continue as an employee.
Chief Retail Operations Officer Succession
Effective April 2021, Marc A. Chilton will succeed Mr. Baker as our Executive Vice President – Chief Retail Operations Officer. Mr. Baker is stepping away after 32 years as our operations leader. Mr. Chilton, age 51, served as our Senior Vice President – Store Operations and Administration from March 2019 until February 2020, after which he has served as Senior Vice President – Store Administration and Development. Mr. Chilton started with us in 1994 as a store manager and has served in roles of increasing responsibility in store management and operations since that time, including serving as the Vice President of our Northern Division, with approximately one-third of our stores reporting to him, from April 2012 until March 2019.