Q3 2020 Shoe Carnival Inc Earnings Call
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Good afternoon, and welcome to shoe Carnival third quarter fiscal 2020 earnings conference call.
Today's conference is being recorded and.
It is also being broadcast via webcast.
And he reproduction or rebroadcast of any portion of this call is expected be prohibited.
Managements remarks may contain forward looking statements that involve and number of risk factors you may.
Risk factors could cause the company's actual results to be materially different from those projected in such statements forward looking statements should also be considered in conjunction with of discussion of fits risk factors included in the company SEC filings and today's earnings press release investors are cautioned not to current undue risk.
And on these forward looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors for to publicly announce any revisions to the forward looking statements discussed on today's conference call for contained in todays press release to reflect future events for developments.
I will now turn the conference over to Mr., Clifford Vice Chairman and CEO of shoe Carnival for opening comments Mr. separate you may begin.
Thank you and and welcome to shoe Carnival of 2023rd quarter Earnings Conference call. Joining me on the call today is Mark Ordan grocer, and Chief customer Officer, and Kerry Jackson, Senior Executive Vice President and Chief financial and administrative officer.
On today's call I'll provide a high level of review of our fiscal third quarter 2014 results as well as an update on our business operations.
Accrual of will provide an update on our strategic initiatives are driving growth.
Followed that Kerry who'll discuss at quarter's financial results well then open the call for your questions.
For fiscal third quarter results clearly demonstrated the strength and.
Dedication of our team and their ability to execute on our strategic positions as well as our enduring competitive differentiators. When we last spoke we have successfully reopened for all our stores welcoming our loyal customers back to satisfy all of their footwear leads and firstly for.
Simpson our corporate offices are also ratio from that we were excited to welcome our dedicated team back.
With that being said the health and safety of our customers and employees remain our number one priority.
As such we are diligently watching and of the hearings at East States Covance and 19 development and any subsequent policy change.
For the fiscal third quarter 2020, we delivered exceptional results and in fact, the third quarter was our most profitable quarter and the company's history.
As we had anticipated and communicated we achieved same store sales growth. Despite of the expense is back to school season, and achievement Euro are unlikely to hear from other fashion retailers and.
We believe our continued strong performance and other incredibly volatile operating environment. There is a direct result of us putting our employees first and make the decision not to implement furloughs during the mandated shutdown.
And then we kept our employees engaged which has proven to be at a tremendous competitive advantage, allowing us to reopen our store it quickly and efficiently.
Back to school played out largely as we had at all with sales occurring later in the fiscal third quarter due to delayed start dates for nearly all of the schools within the markets we operate.
Our loyal shoppers Trust shoe carnival to have the latest trends and the best brands to make their shopping experience and simple and enjoyable and fact shoe Carnival has a history of delivering strong back to school sales results.
At this year, Mark the 18th consecutive year of comparable store sales increases during the back to school season, despite the delay and in person and learning.
We are incredibly proud of this track record and our ability to deliver the products, our customers want and need when they want to mark.
Mark will provide more detail and back fiscal results and his prepared remarks at the same time, we continue to see sustained growth and our E commerce platform delivery and another triple digit gains in the quarter, even while our brick and mortar stores were open.
The execution of our merchandise strategy and the third quarter was second at from non our merchants and partnership with our vendors.
Sort of keep our inventory of fresh and inline with key trends and brands to ensure shoe carnival maintained at superior selection of the merchandise our customers were looking for.
This focus allowed us to significantly reduce our promotional cadence, which in turn and drove higher EPS PS and at 260 basis point improvement and product margin.
As a result gross profit increased 110 basis points for the quarter.
We replenish fast selling products, including higher performing sandals and athletic further driving sales growth and providing of the shoe carnival customer and differentiate us and satisfying shopping experience.
Once our merchant and with merchant team solidified our back to school Assortments. They quickly turned their attention for holiday and by this timely isn't third quarter, we had transitioned to our stores to a great selection of product across all categories for fourth quarter selling.
Our investments in technology and continue to drive growth across the organization.
E Commerce sales for this year are exceeding our three year at target level, while achieving a significantly higher merchandise margin.
And.
Im very happy to report our shoe perks loyalty program continues to expand now reaching nearly 26 million members.
Looking at comparable store sales by department for the quarter of dollar Athletics continued to outperform the category was up high single digits overall, driven by strong growth and both women's and men's product categories.
Women's athletic were up low double digits, while many of its athletic was up mid single digits for the quarter sales from both mens and womens non athletic categories were driven by sandals.
Canvas casuals and utility.
Consistent with the last quarter dress shoes were down double digits, reflecting a more casual and active lifestyle as many offices remain closed.
Kids comparable store sales were down low single digits as a result of of a delay in back to school and and remote learn and kids and have non athletic was up mid single digits, While kids athletic was down mid single digits for the quarter.
However, sales rebounded significantly and in October and will begin to return to end and person Martin.
We ended the quarter with inventory down 5.6% on a per store basis. However, as I mentioned, a moment ago. We continue to work closely with our vendor partners to replenish key categories and classifications that are driving our sales.
We are very comfortable with the amount of inventory and flow that we have coming at them for the holiday period, and I'm, especially happy with of terrific selection of fall and winter boots as colder weather will dictate that transition from more seasonal footwear.
We remain focused on our financial strength and flexibility as our discipline in this area has proven to be and valuable as we navigate these at ever changing conditions.
As I've mentioned, we have continued to support our employees and even with this investment and our people. We remain debt free we ended the quarter with approximately $47 million and cash and cash equivalents, our strong balance sheet and combined with our strategic investments and Super.
And our execution has allowed us to make incredible progress on of the long term goals and we will continue to guide us through any challenges ahead.
The current environment continues to make it difficult to provide clear guidance. Therefore.
Therefore, we will not be providing Q4 guidance I will say that we are encouraged by our and market share gains in Q3 and feel we are well positioned continued capturing market share in the future.
We're been vigilant to ensure our employees and customers remains sales and net shoe carnival continues to execute and create long term value for all stakeholders.
With that overview I would now like to turn the call over to Mark Gordon to provide an update on our strategic initiatives Mark. Thank.
Thank you Kirk the shoe Carnival team achieved incredibly strong results in the third quarter. Despite a macro environment that continues to be unpredictable.
At the same time, we advanced our core strategic initiatives, we acquire new customers, we grew our market share and achieved record quarterly profits.
Im very proud of and so thankful for our 5000, plus and fluids commitment and our customer focus to arm of this challenging macro environment.
During Q3, we achieved our 18th consecutive year of sales growth for the back to school of sales period for.
For our last earnings call, we share at that we anticipate at the back to school selling period and start later than it has historically and expense further and into early October this.
This is precisely what happens are.
For 2020 back to school season occurred throughout all of August September and continued into early October.
While of course selling period ended by mid October not all store systems have returned to end person education with 36 school districts or nearly 10% still continue and virtual only education by the end of October.
The key to our third quarter profit results, but the teams ability to quickly and efficiently shift for marketing investments out of a traditional TV and print plan and early August into targeted digital marketing, social CRM and store experience elements spreads later in Q3.
This decision enabled us to be nimble with our investments and react to school district back to school of date announcement and they happened.
As a result, we're very pleased with our ability to capture market share during Q3 and to deliver same store sales growth of nearly 1% for the quarter.
Our digital marketing and ecommerce efforts continue to far exceed expectations.
Even with all of our brick and mortar stores opened for Q3 E. Commerce sales grew over 150% achieving high double digit traffic growth and sales growth of over $20 million.
E Commerce revenue surpassed 13% of total company revenues for the third quarter for comparison shoe carnivals ecommerce sales represented less than 6% of fiscal third quarter revenue in 2019.
Our world class merchandising team had the product customers wanted to purchase whenever and wherever they chose to shop.
The strong inventory position enabled us to achieve substantial conversion and growth both online and in our stores, while significantly reducing our promotional intensity.
For example, we delivered an increase and E commerce product margins of over 200 basis points for the quarter by eliminating low return on investment promotions.
Our efforts against our ecommerce growth strategy remain well ahead of our strategic plan and we will continue to invest to grow this business for many years ahead.
Our industry, leading CRM strategy continues to provide valuable customer insights to our business, resulting in more efficient and effective marketing outreach we.
We delivered nearly 10% increase and shoe perks loyalty membership compared to the third quarter of 29 team and are rapidly approaching 26 million members.
We also continue to see gold members track significant sales margin and profit dollar growth from the quarter versus Q3 2019.
The average basket size of of gold member was over $18 higher and non member and the quarter.
Of converting our customers and to gold members continues at the high priority strategy.
Additionally, our investment and essential technology infrastructure continue to enable our growth strategies.
Despite the pandemic during Q2 and Q3, we effectively rolled out and new warehouse management system, and a new order management system.
These technology and platforms helped enable the realization of our triple digit E commerce sales growth achieved and 2020.
Importantly, these technology enhancements enable a long runway of profitable E commerce growth in the years ahead for shoe Carnival.
As we continue to navigate the current environment, we're making continued progress against our long term real estate and store profitability strategies.
During the quarter, we opened one new store within existing markets and did not closing stores.
We anticipate one openings and one closing through the end of the year, bringing our year end store totaled at 383 stores.
We continue to closely monitor the markets of which we operate and make strategic decisions based on store and market profitability.
In closing I continue to be very proud and thankful of our team members driving sales growth for record profits achieved during the quarter and the continued success of advancing against our long term strategic initiatives.
With that let me turn the call over to Kerry Jackson to provide more insight into our financial performance for the quarter.
Thank you Mark.
At cliffs and Mark both mentioned, we saw another strong quarter and unpredictable environment. Thanks to our team and their continued commitment to delivering on our strategic priorities.
We delivered sales of $274.6 million per quarter.
With comparable store sales of nearly 1% driven by E Commerce sales.
This quarter's comparable store sales growth was on top of at 3.5% comparable store sales increase and the third quarter of fiscal 2019.
Our E commerce business sustained triple digit growth, while our brick and mortar store sales during the quarter were negatively impacted by delayed back to school shopping and Colgate and related and uncertainty in the quarter.
Our gross profit margin for the quarter increased to 32.0 per cent compared to 30.9% and the third quarter of last year, making a shoe carnival as most profitable quarter ever.
Our merchandise margin increased 160 basis points, while buying distribution and occupancy expense increased 50 basis points as a percentage of sales.
The increase in and merchandise margin was primarily due to lower promotional activity during the quarter.
An increase of 260 basis points, and our product margins offset 120 basis point increase and E Commerce shipping expense.
The increase in buying distribution and occupancy cost as a percentage of sales was primarily due to higher distribution expense.
Investments and our distribution center. This year resulted in higher software depreciation and labor cost for implementation during the third quarter net.
These investments will allow our distribution center to assist the stores and filling E commerce orders as we rapidly grow our ecommerce sales.
As DNA expenses increased $1 million from the third quarter to $67.6 million, primarily reflecting higher advertising and E commerce related operating expenses.
As a percentage of net sales SDMA increased to 24.7 per cent compared to 24.3% and Q3 last year.
The effective income tax rate for the third quarter was 26.8 per cent compared to 24.9% and the same period last year.
The lower tax rate in the prior year was due to a favorable adjustment last year, which did not recur and this year.
Net income for the third quarter was $14.7 million compared to net income of $13.7 million and the third quarter last year.
Net income per diluted share for the third quarter was one dollarsthree compared to income per diluted share of 94 cents and the prior year third quarter.
Net income and diluted net income per share in the quarter for all time records for the company.
Now turning to our cash position and information affecting cash flow.
Depreciation expense was $4.2 million for the third quarter compared at 4.3 million of the prior year quarter.
Capital expenditures for fiscal 2020, including actual expenditures through the third quarter our ex.
Expecting between 14 and $15 million with.
With approximately $8 billion to $9 billion to be used for new stores relocations and remodels for.
For previously mentioned upgrades to our distribution center are expected to be about $4 million.
As Cliff mentioned, we continue to work closely with our vendor partners to strategic strategically manager inventories.
As a result inventory declined 5.6% on a per store basis, and we ended the quarter with inventory at $274.3 million a.
A decrease of $23.7 million compared to the prior year at third quarter.
As of October 30, Onest 2020, we had no outstanding debt and working capital of $215 million.
Cash and cash equivalents were $46.7 million.
And our borrowing capacity was just shy of $100 million at ended the quarter.
This concludes our financial review now I'd like to open at the call for questions.
Thank you in order to ask a question healing and a press star one and your telephone again at Star one on your telephone if you need to withdraw your question press the pound key.
And your first question comes from the line of Mitch Kummetz from pivotal research. Your line is open.
Yes, thanks for taking my questions.
Wanted to start by digging ended the merch margin a little bit so merch margin of 160 product margin of 260 carries the difference the E. Commerce shipping was at a 100 100 bips of pressure on the merch margin.
It was 120 bips of of margin pressure for the increased E commerce shipping okay.
Okay, and then the 260 increase and product margin.
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I would imagine that there was a little bit of pressure with athletic copying up for classic.
And close at high singles, So that was better than your overall comp for that does that was that not the case.
This is Mitch the of the reasons of Mark Merch margins were up and everything to do with lead became less promotional during the quarter right. What we found was at with we added a tremendous selection of athletic product. We had a we had a good selection of sandblast product that the customer was.
Looking for and there was really no reason for us within.
And our half saying at.
And we'll talk about competition, but I think we had a superior selection of those kinds of products at the customer is looking for and really we looked at each other said lot of world of we've been and promote this does that customers are coming in and and buying less let's get upset at every penny and margin, we can and out of it and thats jumped at.
Decision, we might well end the rebar of guidance interrupt us, let's say at the Grand part about shoe Carnival and we can make those decisions over the daily basis at the.
Our systems are such that of this business had turned sour.
At any time during that time period, we could have add at all of those promotions pretty much of the various next day.
Yes, and the reason I asked about athletic is because I would have guests at that was a bit of a drag which the reason I wanted to.
And get that answer was because I would think from a like for like standpoint.
Gross margin was up even more than two and our 60 basis points this year with them.
Getting app.
Bob.
And try and to to go with it what do you put Wi.
I would I would have thought without product for more than the overall business typically that's a bit of out of of product margin drag. So if you were sort of when adjusted for that that would suggest at the product Mark.
At March was even stronger than the Twosixty does that make sense.
Yes.
Net area, but.
I think at all had to do it could have been.
So hopefully that movement moves of say at another way.
Sandal margins were really strong athletic margin was very strong and we weren't nears.
Promotional as we were a year ago, we actually cancelled one of our backs of school insert because we just didn't need to do it and that and allowed us to of.
For the get additional margin out of the product yes.
And we've sort of gotten mark so what's the takeaway for Q for on the product margins.
Again, I think some of the reason why you were able to avoid the promotions was just because you guys had credit product and channel inventories pretty lean I would imagine you feel equally good about the product and channel inventory going into Q4, although I don't want to put words in your mouth.
Thats adjusted you and expect a strong fourth quarter for product margins well as I said in my prepared remarks, and very pleased with the merchandise selection of we add the day and I'm pleased at the level of above seasonal product I'm pleased with the level of athletic product, but we're not going to give what for there's just too many unknowns.
Going into Q4, and we just can't give any guidance yet.
Yes, just a couple of other things Clifton Boots, you met you made a few comments on boots, it's it's been and warm I know that those things kind of even themselves out and I would imagine I think December was more of last year. So maybe there is an opportunity there, but can you kind of just speak to.
Yes, if I recall correctly, that's about 25% of your Q for typically I think you were encouraged about boots going into.
End of the holiday season, although although I think as an overall category of at planned.
Yeah, and I think casual and dress down so just anything more you can say about your outlook for boots and and the.
The importance of whether to kind of drilling at that going.
I will say this you take because of the notes.
And then we decided that it is about 25% of our total volume for the fourth quarter and we have experienced the warm the of warm beginnings of fourth quarter and the past and.
And what we found is at.
When the weather turns cool and the customer can't get out and walked and neighborhoods and goes. It's just it's just too cold do so at that point, they buy boots and booties.
The boots, we have this year to the selection boost this year for a little different than years past not near term of the dress boots. Those people are the losses.
Very casual and and and very warm.
Cool weather driven out of for the say warmed aware, but cool weather driven.
Okay, and then I guess lastly speaking of good now and I think we are a few of US asked you on the last call. If you could comment on any benefits that you saw from from some of the bankruptcies out there and I think you said that you'd be better prepared to address that on this call. So I don't know for you have any any new information for you.
To provide there.
On the other love the pass that question over to carrier of Mark and I will have to answer it.
It's mostly answered at all have any day.
It is the same to add for that Weve Daryl.
What we have is what we saw was at early in the quarter as I've said everything was everything.
Turn to own as soon as the schools were announced debt when they were going to open we at a been a pretty of tough August.
As weve related and our last call, but one of the schools started to go back.
Things pop everywhere not just in the markets where.
Where we lost competition. So I don't really have a lot to add to that okay, all right and at this yep Yep.
One of them.
For the back to school was so unusual wireless so and delayed for the quarter and it's really hard to tease out what were the various changes other than the big picture that day schools going back to layer and a lot of our sales for shifted like Cliff said in his speech into September and October right.
Okay. Thanks, guys good luck and.
Q.
Your next question comes from the line of Sam Poser from Susquehanna. Your line is open.
Good afternoon and few Buddy.
Well, let me just follow up a little bit on the margins I mean, you you just and just to just with.
We'll put the Tibet you guys chose not to be promotional because your inventory through clean and you didn't need to be and you had items equal one at a regular price for.
Our inventories are always clean coal.
We're very conscious of people of clean inventories, but what we saw Sam and Europe. So the rest of your answer is correct.
As customers were coming in and they were very focused incredibly focused on what they wanted to buy and there was just no reason for us to give margin away on that product.
Okay and then.
You mentioned that what was the store comp down in the quarter.
Yes, and could at that one Kerry I think.
We're really given the overall comps.
And and not the individual components.
Okay and then.
When we think ahead of entertainment.
Yes, I know that use of they were down.
You gave us direction, but I wanted a little more.
Correction.
And you talked about the stores.
Given how well you are doing and it looks like the CRM is working for you are driving you are gaining share as you put it.
Where does this leave us thinking into next year about store net store openings being more aggressive with store openings.
And so on and so forth do we see.
Are you going to step on the store opening is are you going to step on the store opening GAAP. So are you intending to do so.
Well at this.
One half of that this quarter and going out to the real estate.
Market and say at Okay, now read at Opus lot of stores that just doesn't happen and all of those are those of long term of.
Flow processes, so I'm not going to comment on whether we're going to choose store opening.
Well I will comment on this we can't make a decision of the third quarter of June store opening of next year and debt actually happen. So.
So I'm not asking you that I'm, saying like you had a much better than everybody else is Q2 also so the evolution over this year, so far has that driven and the.
The increase from your store opening plans over the last six months for next year. We are inclusive of will have net openings next year and if so how much.
Hi, Sam its Mark we're going to continue at a big Conservative capital at all viewpoint and at this moment of time with all the volatility of going on and the macro environment.
Good point, we're not putting guidance out there related to the store count, but as we previously shared it we do not engage and having a net new store openings and the 2021 perspective, but for the world is evolving very rapidly. So we're not ready to put a from line and the fans for staying nimble for evaluating the markets.
And valuating selling out of business of competition.
Competition and markets for strong and will continue to evaluate as we get more clarity and.
As the COVID-19 evolution over the months ahead.
Thank you and then at two more one can you give us the comps of all non core lease for the general direction of comps by month.
Yes.
Yes was down and in the mid teens.
September was up and the high Twentys and October was up mid mid singles.
Okay, and then lastly, nike's made some decisions and too.
To close a number of retailers, including a lot what sort of overlap.
Aerie and regions that that you have stores.
Do you do you foresee this as an opportunity I know you've talked about you have a bunch of gross with Nike shops, and we'll stores.
Do you foresee this as an opportunity for next year and how many of these shops do you have now and are you planning and opening.
Sam we ever so.
Excited about our partnership with Nike and continued strength, we have over a 100, Nike shop and shops currently with and the shoe Carnival of fleet.
And our plans over the next three years start to have over 100 more rolled out across the fleet.
North of half of our overall store footprint at Nike shop and shops.
As they've been a wonderful brand statement of tremendous assortment.
Yes, and ties and team has with Nike company, and we think our opportunity lies to continue to conduct.
Though.
For a nominal assortment, we have of Nike with our family footwear shoppers so with the current a really good share.
And as far as the other retailers Nike being told from a number of other retailers. So that you overlap with I mean, how how is how is that impacting you don't need to be specific but has that at acting the way.
For planning forward.
In general because that should help drive some traffic to regard.
By the way.
And I think Nike has lot of other stuff.
And Sam and any given of the.
Considering the strength of Nike to our overall sales out of the actually been giving guidance I will tell you that we have incredible relationship with Nike.
And then we've spoken with them.
Many times over the past of.
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This past quarter, so I feel of filler.
Phil our relationship has never been stronger and the opportunity that.
Presents itself, we'll be well.
We will be.
Address.
Both companies.
Thank you are going to vote for you for president and for years and I think.
Thanks Kerry.
And.
Thank you for it.
Your next question comes from the line of Greg Pendy from Sidoti Your line is open.
Hi, guys. Thanks for taking on pricing can you just remind me almost for a while for some of your long term target for ecommerce wants to do outside of recently and what is for new target. If you did.
And when you spoke on lot of Calcomp of multi Monte and.
Getting to your long term ecommerce targeting and upon per song.
Hi of as Mark.
For our multi year goal was to reach 15% and our.
For ticket plan.
With the strength of the consumer switching for ecommerce we have increased that and we are aiming for at.
20% plus objective and the next three to five years, we continue to see.
Great reaction.
From conversion once consumers engaged for shoe carnivals online business and traffic is search and with the CRM activity. So yes, we have significantly increased our expectations.
The.
Only thing I'm going to add to that and Mark mentioned this was our first of the CRM program. So.
The face of was positive to say we've done over the past three to five years was implemented in my opinion, the best CRM program and the family channel, we have the ability and I've talked about at many times ability to talk one on one with our customer and and drop of them to either our ecommerce site or to our store.
For us so we do see and we think that debt with the one positive coming out of the code of 19 is the fact that our customer has discovered our website at least at this gives us tremendous opportunity to execute our long term vision.
And the short term.
And I guess going onto of sand the phone.
On that part of questions about to store growth and.
And they are becoming indicating going towards 20% and ecommerce and will become of sort of shifting from is how important is it to get sort of closer to the customers and be sort of nationwide because it seems like.
You are selling and then on the store growth and.
Your presence on the west coast might be.
A little bit lie and and how important is it to be close at it to get more stores out there from lower your shipping costs.
If you look at that strategic target, we have out there to achieve 20% and three to five years rig and surpassed that within our existing footprint of of 35 States, we operate and they've got significant of white space within those states and it's highly profitable.
The strong brand awareness and great affinity.
Longer term there is certainly opportunity for nationwide growth and significant penetration into years beyond that three to five day window. So we really see this as a tremendous mid term growth.
Both revenue share and profit engine as them moving into a long term growth at the customer moves more and more on non.
Okay, great. Thanks, a lot.
At June.
Your next question comes from a line of credit media from Wedbush. Your line is open.
Good afternoon, gentlemen, nice job on for.
And Mark.
First question for you.
Ecommerce digital up 150 seems like that accelerated coming out of.
Mean out of August just what was the timeline for at the quarter and.
Any reason, we should step back and say that should moderate at all going into Q4.
Any color about for trajectory and and thought process broadly.
Q4 of the comparison versus last year et cetera.
And would be helpful.
We saw triple digit growth on our E commerce business growing for.
For out of Q3 period, particularly at the back to school.
Dave became live later in the September timeframe and continuing on into October.
We as we've said on the call we intentionally shift at our activities to engage with the customer assets back to school day happens of verified nimble being able to move day by day week by week to adjusted as a result.
And I went back to school.
It continued to generate at 150% but.
But at the same heavily weighted and the higher triple digit growth towards the back to school dates from September on board.
In terms of go forward at such that we're not going to get.
Guidance per se, but we remain very confident and our position for E Commerce.
The customers' engagement from a conversion perspective and continues to.
Meet our strategic goals and I think we're quite optimistic that we have a right to continued of our market share now and in the future.
For.
Got it was fair to say October was pretty similar to September in terms of overall gross.
On E com.
And it would be fair to say September and October very similar strong and triple digits.
Yes, okay.
With regard to the margin shipping expense of 120 basis point headwind and.
Net down relative to one of our last quarter pricing.
But as we roll forward.
With everything we are doing from and targeted promotion and better mining of CRM on the digital side from Q.
New warehouse.
Update.
For that.
Pressure point moderate for that as we roll from Q4 and into next year.
At pressure on shipping and.
Obviously kind of happen.
Gross next year for Jeff.
Sure at the better your thoughts on that.
For shipping expense our per package based and skin care continues to escalate the biggest driver for US is the comparison of the volume so.
Good day.
Last year. After we started our CRM program, we increased our E commerce penetration by quarter, which Q1, two three last year and about 5% to 6% and Q4, we did about 11%.
So.
Our comparison.
In Q4, this year will not be as being at Delta between what we did last year and Q3 and this year and Q3. So that we should see why was the pressure against our shipping charges. It should not be as large just because our volume dealt and won't be as as large it was in the prior quarters.
Okay.
And now.
Q4 will be down relative to what you probably saw in Q3 income for the volume in Q4 last year, Okay got it not at all.
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I'm curious just on food click how you just remind us of how you're how you're planning and for the season.
Down down mid.
I'm sorry at down like mid single digit selling cartridges that down mid single digits, sorry, my bad at at the digits of none of that.
Yes down mid singles.
Okay and.
Just on debt.
I'm curious and I'm not going to here and they're going to get guidance share Sarah.
Hi.
Im curious what sort of a momentum you had in October our debt.
Thank you at all clearly being strong.
And your through from the challenges of back of fall on total.
Reason and our give me that recent.
Why you would potentially see at positive comp Paul at the same at all what are the things that you're cautious about obviously store shutdowns of some degree you have the benefits of digital company sorry at.
Hi, and how you think about that in terms of.
For it and cost gross.
Well, you know theres been an upsurge in the bars and.
Virus and we have no no idea, what's going to happen state by state of the governors are in charge of that.
So.
No.
And I don't not not been smart here, but if.
If we had better visibility of of that and I could give better visibility on on guidance, but.
So the issue is that at until we get.
Vaccine.
And customers feel comfortable on of getting out again, I think given guidance any quarter until that time period, it's going to be tough.
Looking at when asked this way of you don't see store closure of training material store closures.
We do not and it does not appear at this point at Thats going to happen.
At this point.
And the Illinois Governor has limited hours of restaurants, but.
Thats not talk.
At that at all about retail.
Okay.
And on lapping from major from me on Ft.
FG and H five test.
Sorry, I only roughly million dollars year over year and anything we can think of at anything being.
At the rate by any chance or at that real at June a rough year over year and any profit for roll forward, which of the mindful of.
And we'll be helpful.
Well the increased in the EPS you name. It was really two factors and if you remember and our prior call. We said that we shifted our advertising to more reflect how we thought the schools for going to go back. So we shifted to average we saved advertising dollars in Q2, particularly in July and.
We really distributed Ddos and the.
September and October timeframe to to file at to have a follow where we thought the customers can be shopping so the the biggest increase on a year over year basis. In Q3 was advertising and then to the other standout was because of higher E commerce level.
Expenses associated with E commerce for up on a year over year basis.
Okay got it.
Okay Thats all lie at that's all I have thanks guys.
Thank you.
And we have a follow up question from the line of Mitch Kummetz from pivotal research. Your line is open.
Yes, Thanks, and I've got a few more so.
I guess to start with on the digital side how come curious.
To get your thoughts on on whether how much better position are you and you were let's say a year ago, just given where the shoe perks membership is for gold membership.
And a CRM learnings over the last 12 months, how confident are you and.
For the E com business.
Relative to a year ago, given sort of those dynamics.
Extremely confident in our progress against our strategic plan and delighted with the way the shoe carnival customers respond to them.
When we look back a year ago.
The E commerce business represented less than 6% of our total revenues and for.
For this latest quarter surpassed 13%.
We really feel of a clear and profitable line of sight for with all of our technology infrastructure now in place with the team those exceptional and with our continued while class merchandising. We think we absolutely have a clear trajectory and get the 20 plus percent of the company its revenues and the next three to five years. So we're very confident.
And at it.
Got it.
And then I think it was mentioned I came from our who said it but at that 10% of schools were not yet back concession and by the end of October.
I am guessing that probably those schools aren't going back until maybe January if that so how much do you get how much do you think that will play into the holiday season and you'll get.
Maybe just to kind.
End of a small back to school season in December and I mean for for the kids at haven't gone back and in person you at that might be going back in January for second semester is there is there something potentially to that.
I think at a time it did have a school opening the especially the one that's been open for that.
We do have of two schools that are going and go back and class learning. The first part of January I do think that you will see.
And those particular cases.
The athletic business, and maybe even the boot business pick up for.
For those kids, but it's such a small percentage overall.
Of our of our stores and.
We chose not to even talk through that other than the midstream.
Yep and then.
And just quick last thing on just on the product side you other.
There's been a lot of talk about kind of what kind of.
How kind of has impacted the business and obviously at the dress business is allowed to be covered cause of at product businesses.
Is is good at I'm, just curious if and when you guys and when you gave your numbers on for products. I think you said adult athletic was up high singles, But then kids athletic was down mid singles.
I assume that there is the adult athletic thats flowing into the back to school of business I guess I guess my question is to what extent can you disaggregate in the quarter of what was back to school versus.
Just a rising tide from the strength of sort of health and wellness and and how much do you think that Thats a real thing.
That should continue to drive your business for the fourth quarter as well.
Tremendous question and then.
Cost of adjusted net but we ask ourselves the same thing.
His letter of knows at the debt our athletic business took off.
And when businesses started shutting down and customers started for people sort of getting out and exercising more graphic business and the second quarter.
Terrific and then and the third quarter.
We we got a little concerned, especially in the active arena because of his business was not not good duty and we felt it was due to the of later back to school and that proves itself out of schools began to open.
Late September early October.
Just one.
Because there wasn't enough time for us to break even at that.
As you look at and Kids Athletic from this time of the schools began to go back and and the end of the quarter of that makes sense so as of.
The weighted athletic business and the only thing and say about fourth quarter at continues to be to be good as kids are returning to school and funding of need to.
Replace their athletic shoes.
All right. Thanks again guys.
Thank you.
And we have another follow up question from the line of Sam Poser from Susquehanna. Your line is open.
Thanks, yet and so we did you all your E com.
What are how is curbside pickup working for you how many stores do you have that end and.
As you evolve.
And as.
Whenever the.
Vaccine comes which would that and theoretically it helps more store traffic.
What what are you going to do in your communication with the consumer to drive.
More people to the store.
Going forward.
Sam at our current and model our focuses on buy online pickup in store and you are messaging and engaging with customers. So they understand.
They can out of the product rights of their all in many different fashions for that can come in and ask the grapes to carnival experience and so weve refocused and message on the buy online pickup and store.
In terms of of go forward basis.
We think thats, an incredibly important lever because of the shoe carnival experience.
For so many advantages when you do come in store for that.
Our focus is trying to convert at customer to be and Omnichannel shopper for the most profitable and most loyal and they get to have that experience.
Which is.
At the light from our 5000, plus passionate employees of care, so much and give that great service as well of the convenience of 24 hour shop and online deliver rights of your house and in any fashion you like.
We made great strides on buy online pickup and store during the last six months.
And significantly growing as a percentage of our online orders, particularly of shipping becomes more and more expensive.
During the past year for all retailers.
Can you give us some idea of what percentage.
Focus is to your two year sales and are you going to do and reserve online the company store features will.
It's still less than a quarter of our borders.
And it's growing at a very rapid pace. So we think theres a lot of upside for us to have that ongoing customer engagement.
Absolutely.
Communication with our nearly 26 million CRM and members the habit of like I said bright for their doorstep and.
As quick as they like to long highly efficient and value deliveries or held for them at the store later on that day.
Thank you very much and.
Q.
And there are no further questions at this time Mr. Cliff separately I turn the call back over to you for some closing remarks.
Thank you I would again like to thank everyone for joining us today and hope you all stay well I continue to be proud of what our shoe Carnival team has been able to accomplish and this ever changing environment, our commitment to financial strength and flexibility will ensure the continued success of our business. We hope you and your loved ones are.
Okay, and safe and healthy and that you have and happy Thanksgiving and we look at the end holiday time period, and we look forward and speaking with you again and March and once again. Thank you.
Ladies and gentlemen, and this concludes shoe Carnival third quarter fiscal 2020 earnings conference call. Thank you for participating you may now disconnect at.
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