Q4 2020 Shoe Carnival Inc Earnings Call
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Good afternoon, and welcome shoe carnivals fourth quarter end fiscal year 2020 earnings conference call.
Today's conference is being recorded.
It is also being broadcast via webcast any.
Any reproduction or rebroadcast of end portion of this call is especially especially prohibited.
Managements remarks may contain forward looking statements that involve a number of risk factors.
These 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 the discussion of risk factors included in the company's SEC filings and today's earnings press release.
Investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of today's date.
The Companys two of the company disclaims any obligation to update any of the risk factors or to upgrade announce any revisions to the forward looking statements discussed on today's conference call or contained in todays press release to reflect future events or developments.
I will now turn the conference call over to Mr. Cliff Sifford, Vice Chairman and CEO of shoe Carnival for opening comments, Mr. Sifford, you get again.
Thank you and welcome to shoe Carnival, 2024th quarter and fiscal year earnings conference call joining.
Joining me on the call today are Mark Gordon President of income.
<unk>, Chief Executive Officer, Carl should better.
Senior Executive Vice President Chief Merchandising Officer, and Kerry Jackson, Senior Executive Vice President Chief financial and administrative officer.
As you saw last week, we announced at that will be transitioned to the vice chairman role on September 30 of this year and Mark Gordon currently President and Chief customer Officer will succeed me as President and Chief Executive Officer on today's call I want to focus my comments.
Merrily on this transition, which has been well planned and mark so the new and exciting chapter for our company.
I have always had complete confidence in our team throughout your organization. Our stores are run by the most tenured management team and the shoe business. They opened the doors every morning, as if they're opening their own business.
<unk> passion and skills, which creates an unstoppable combination.
We have built the best merchant team and the shoe business made up of tenured professionals, who have the industry, leading institutional knowledge of our customers and how they shop.
Our management team on every level also has a tremendous track record and passion for the success of this you made concept.
This announcement is a culmination of a multiyear succession plan, we established when Mark joined the company in 2018.
Which was aimed at ensuring a seamless transition of leadership.
This is critical as we position the company to continue our strong track record of financial and operational performance, while at the same time, maintaining our commitment to our employees.
Customers vendors and shareholders.
Mark and I have worked closely together over the last several years and his cleared of passion for our concept of ambition for this business gives me great confidence in his ability to lead shoe carnival into our next chapter.
His strategic direction deep knowledge of our customers and unwavering commitment to our employees make him the perfect fit for the job.
He has been instrumental in the company's growth since that day in started in 2018.
Our transition to vice chairman with unwavering confidence that shoe Carnival will not Miss a beat and I have tremendous confidence that mark will take shoe carnival to new Heights.
We also made several other leadership changes, we believe will enhance the current leadership and provide deep bench strength across the organization Mark.
Mark will talk more about these changes in his comments.
Looking back from my time as CEO I am extremely grateful for the opportunity to have led his team as talented as of shoe Carnival family.
We have accomplished so much together, both financially and operationally over the last nine years.
From a financial perspective, we grew revenues to over $1 billion.
Delivered 11 consecutive years of comparable store sales growth leading into 2020 realized best in class Merchandised margins and maintained disciplined capital management throughout various economic cycles. Most recently as it relates to the Covid.
19 pandemic.
I could not be prouder of the shoe carnival team's performance throughout 2020, especially considering the ongoing impact of.
COVID-19 of the retail industry and broader economy.
We saw a record results for the year and because of our strong balance sheet, we were able to keep all our employees working.
Operationally our accomplishments over the past nine years have been plentiful.
We re launched our ecommerce.
Platform, which grew to approximately 20% of our sales and most importantly, we're ready when our customers needed at most.
We also reinvigorated our shoe perks loyalty program that grew to 26 million members from 1 million members, we could not communicate with.
I am happy to say shoe perks was responsible for approximately 67% of our overall sales from fiscal 2020.
We have also been at several new systems over the years, including at industry, leading CRM program that is driving of sales both online and in our brick and mortar stores.
A new transportation management system, and order management system and later this year, our buyers will be managing their distribution and orders from our new planning system.
These systems have enabled our employees to work more efficiently saving the company at time and resources we have.
Also of established several new programs have supported our commitment to our customers, including our shoes to unit program, which opened up total company inventory to all stores and we were first of all for ship from store, which essentially turn every store end to end the ecommerce fulfillment center.
Our strong fourth quarter and fiscal year 2020 results are true reflections of the resiliency and dedication of our shoe carnival team and their unwavering support of our loyal customers.
It was just a year ago, when we announced the closing of all of our retail stores and as a team we quickly shifted gears to meet the needs of our customers.
But of Italy, Rolling our E Commerce business.
June we have safely reopen our stores faster than any of our competitors.
Looking back from what we were able to achieve and at the time of such uncertainty makes me incredibly proud to have had the opportunity to lead this organization.
Today as part of the transition cross should better senior executive Vice President and our Chief merchant will walk you through the merchandise categories, but first I'd like to turn the call over to Mark Gordon to provide an overview of the quarter and an update on our strategic initiatives.
Mark.
Good afternoon.
Before we discuss our record Q4 results I'd like to recognize cliff for his outstanding contributions to the shoe Carnival organization.
I've been very fortunate to work closely with clip over the last three years.
His deep industry knowledge and leadership in the <unk> channel over the past four decades set them apart as one of the retail leaders our respect most.
First decisions during his tenure as CEO of mixed shoe carnival to healthy consumer centric company. It is today.
First investing in consumer technology enhancements.
Put us in a position to succeed Dermot incredibly volatile market at this past year.
Making significant investments in our e-commerce platform and customer relationship capabilities for key catalysts to achieving the record results. We achieved the last three quarters. Following the pandemic store closures, while at the same zone letting of foundation for continued growth well into the future.
Anyone who has net cliff immediately loans, just how passionate and knowledgeable he is about merchandising and the vendor community.
He has worked tirelessly over the past 24 years to establish shoe carnival at the top destination for family footwear customers.
At the long lasting relationships with our vendor partners.
I'm excited to build upon those relationships as we move forward with our strategic partners.
I am honored for the opportunity ahead in two of being selected by our board of directors to succeed Cliff as CEO and I look forward to continuing to partner with him in his role as Vice chairman of the board.
In addition to the planned CEO transition, we announced I'd like to highlight three additional components of our succession plan.
These changes further strengthen our leadership team and position us well for the future as we execute our long term strategic funds.
First I am thrilled to share at the cost of about of our Chief merchandising officer, and EVP has been promoted to senior executive Vice President Chief Merchandising Officer.
For the past nine years, Carl has built a world class Merchandizing team and it's been a key leader among the shoe Carnival officer team.
Is 40 plus years of retail merchandising leadership in both of specialty retail and department stores will continue to keep shoe carnival at the forefront of the industry.
I'm excited to work closely with Carl and the vendor community in the years ahead.
Second part of children has been appointed executive Vice President and Chief retail operations Officer, succeeding Tim Baker of effective April 4th.
This month, Mark <unk> <unk> year in the retail industry and his 32nd year of an operations leader of shoe Carnival.
His contributions to the company have been many and significant since joining shoe carnival of $19 89.
Of this particular value is focus on people development and operational excellence, which has provided us with an industry, leading store organization and of deeply talented leadership team as we move forward.
Thank you Tim for your dedicated service to shoe Carnival.
Mark children has been with the shoe Carnival team from 27 years enrolls of increasing responsibility in store operations.
Most recently Mark served as senior Vice President within operations working directly with them.
He is a respected executive and people leader across the organization and as deep broad based experience will be invaluable as we look to grow shoe carnival in the coming years.
Finally, patrik <unk> has been promoted to chief accounting officer.
Patrick has been an excellent addition to our shoe Carnival finance team since he joined in 2019.
They're carried leadership Patrick will further bolster our already strong financial organization and at the layer of financial expertise that will enable us to continue to deliver financial strength discipline and flexibility.
Carl Mark and Patrick each point of excellent knowledge focus on driving shareholder value and experience to our leadership team at <unk>.
No both Kerry and I look forward to working closely with them at.
We move forward.
Moving on to performance on sales thankful for the continued commitment of our shoe Carnival team members there.
They are focused on our customers experience and delivering operational excellence.
2020 was an unpredictable year, but our team rose to the challenge and delivered value for our customers and our shareholders.
The shoe Carnival brand unique consumer experience and broad product assortment positions us very well for growth in fiscal Q4.
We delivered record sales and profit for Q4 with a comp sales growth of six 4%.
Merchandise margins expanded by 160 basis points.
And operating income funds of the highest Q4.
Up approximately 114% versus 2019.
At the heart of our long term strategy with providing consumers the preferred shopping experience and product assortment within the family footwear channel.
We believe our strong 2020 sales and profit outperformance in the channel reflects our 26 million plus loyal consumers choosing to engage of shoe carnival for their family footwear needs wherever and whenever they chose to over the past year.
Throughout the year, we continue to rapidly progress our consumer engagement strategy to develop the leading digital analytics and customer relationship capabilities in our industry.
Despite the pandemic I am pleased and surpassed our brand building strategic plans during the past year.
By the fourth quarter, we have robust consumer data from our new customer relationship platform, which enable highly accretive customer segmentation and targeting capabilities.
These new capabilities enabled both profitable new customer acquisition initiatives.
Our deep consumer understanding is rooted in our customers' omnichannel volume behavior.
We're positioned in 2021 and beyond to unlock significant consumer insights and growth opportunities with our strategic vendor partners.
As I transition into my new role as CEO I am excited to work closely with Carl and our top strategic partners to create brand value from our deep consumer analytics and capabilities.
In addition to providing the profile of the consumer experience and the channel. Another key part of our strategy is to increase merchandise margins by reducing promotional intensity.
Consumer data that we've been able to collect and analyze at the enabled a sharp reduction in promotional intensity and the elimination of many low ROI of customer promotions and marketing activities.
We pivoted away from our historical heavy reliance on bogo half off promotions during the chain for non peak periods in 2020.
Instead use our customer relationship platform and analytics of segment and personal lives compelling product offers.
Eliminating promotional intensity resulted in net increased product margin up over 300 basis points for Q4, we.
We've been so encouraged by our consumer response to the strategy that we have accelerated our plans for example, we eliminated all bogo half off promotions for the current quarter with continued encouraging consumer results and sales exceeding expectations.
Our branch strategy as resulted in expanding and deepening our connections with our $26 million plus loyalty members at the end of the fourth quarter.
We added over 2 million, new members or nearly 10% growth in consumers directly reach year over year.
For our goal of consumer membership that basket of significance.
It was approximately $70 for the year generating over $15 more for older and non numbers.
We remain focused on growing our relationship with this segment of consumers can see robust growth opportunities with both our athletic and non athletic of strategic brand partners.
Holiday focused customer acquisition efforts also drove strong results.
Consumers, who are non loyalty members grew sales in the teens for Q4, increasing the total year to mid single digit sales growth.
Our targeted digital marketing capabilities were key in acquiring these new customers and converting into record sales levels.
Our strategy to rapidly accelerate our digital capabilities and specifically our ecommerce strategic planned far exceeded our 2020 expectations.
For the full fiscal year E Commerce sales grew over $110 million or 175% in fact shoe Carnival E. Commerce sales grew triple digits in every quarter during 2020.
Product margin associated with E. Commerce sales was up over 300 basis points compared to prior year in the quarter and over 150 basis points for the full year.
E Commerce sales represented approximately 19% of company sales for 2020 compared to approximately 6% from the prior year.
When the back end, we implemented a new warehouse management system and order management system to enable our long term strategic growth plans and augmenting E Commerce ship from store order fulfillment capabilities already in place.
Moving on to our long term brand development and consumer engagement strategy.
With such robust consumer insights analytics and digital capabilities in hand, we're excited to announce a strategic plan to modernize our most profitable stores across the fleet.
Our goal is to have approximately two thirds of our store modernized in the three to five years ahead. This will be achieved through a robust annual remodel plan.
Relocations, where we have strong customer opportunities of the market, but underperforming real estate and reigniting new store growth.
We're currently finalizing our beta test mode on store experience and design enhancements and are very pleased with our consumer learning.
We plan to move ahead rapidly with Rollouts. This year, assuming COVID-19 does not disrupt any development plans.
As we have shared during the past year, we chose to take a conservative capital approach during the pandemic and we'll continue to do so in relation to new store growth for 2021 of.
Our strategy is to continue to accelerate our store fleet four wall profit contribution from.
From 2021, we plan not to renew approximately 10 leases on stores that do not drive long term profit potential nor can match with our most valuable consumers.
We anticipate opening one new store this year.
While we are not providing 2022 store opening guidance at this time, our intent is to reignite store growth in the years ahead and to continue to rapidly accelerated e-commerce growth.
Teams of our mining the rich CRM insights in hand, and is highly profitable real estate opportunities open up in late 2022, and 2020 slate we plan to pursue store openings within existing operating states at the top strategic priority.
Our disciplined capital management strategy resulted in closing the year in our strongest balance sheet position.
At quarter end, the company had no debt and approximately $106 million in cash and cash equivalents.
The strength of our balance sheet, coupled with our outstanding team and their dedication to executing our consumer centric strategy has allowed us to achieve our strongest Q4 operating results and what has been one of the most difficult period for retail in modern history.
Additionally, this healthy position enabled us to return increase shareholder value.
As our board of directors approved of 56% increase in our dividend last week.
Kerry will discuss this and other financial updates in greater detail momentarily.
In closing I'd like to reiterate my gratitude to cliff for his leadership and his partnership over the last three years.
Further I want to offer my heartfelt thanks to the entire shoe Carnival team for all of our hard work over the last 12 months.
2020 brought about events that are hopefully once in a lifetime.
And our teams ability to serve our loyal customers and hung together as an organization was remarkable.
Our strategic investments to build our brand our unique consumer experience our talented team strong vendor partnerships and our superior execution at the cornerstone of our success and continue to be our focus ahead.
I'll now turn it over to cost of EDA Senior Executive Vice President Chief Merchandising officer for an update on our product performance of an inventory position.
Thank you Mark I am excited to join today's call and look forward to getting to know each of these more in my new role.
Before I get into our performance during the quarter I'd like Echo Mark strategy to Cliff at has been a pleasure hasnt been opportunity to work with cliff over the past eight plus years. The leadership has built a strong company with an outstanding culture that is positioned for growth.
Over the past three years from working closely with Mark we've been able to growth synergies within our merchandising marketing and E. Commerce teams. This enabled us to successfully navigate through the pandemic maximizing sales and margin. This along with our expanding vendor relationships has positioned shoe carnival to continue to grow.
Through both brick and mortar and e-commerce channels now turning to comparable store sales by department for the quarter adult Athletics continued to outperform the category was up mid teens overall, driven by strong growth in both women's and men's product categories, which were both up mid teens for the quarter.
We continued to deliver triple digit athletic ecommerce comparable sales increases.
Our leadership position in the marketplace enables us to continue to deliver the broad trend right Assortments our customers are looking for.
Sales in womens non athletic categories were driven by comfort sports shoes as customers continue to work and quarantine at home sales in men's non athletic categories were driven by <unk> sales. The increase was from both the work boot category as wireless to casual hiking boot category.
Robotics people got tired of being confined in their homes, Inc. Ventured out for exercise consistent with last quarter dress shoes were down double digits, reflecting a more casual active lifestyle as many offices remain closed.
Kids comparable store sales were up mid teens for the fourth quarter.
One schools in many markets return to some form of Inc. Class learning, we experienced strong sales in children's casuals and in the Atlantic categories Kids non athletic was up mid teens, because athletic was up low teens.
We ended the quarter with inventory down 8% on a per store basis. The industry is currently experiencing major supply chain issues from the factories to the ports and from the ports to our DC.
At shoe Carnival, we have built an outstanding merchant Keene their experience with our company and their position in the marketplace with our vendors at second to none we believe in the strength of this team and the fact that we did not furlough are buying staff has given us an advantage of supply chain.
We continue to work closely with our vendor partners to deliver fresh new product and replenish key categories and classifications, we are monitoring our supply chain very closely and reacting when need at our.
Our increased marketing at analytics capability has given us insights into the results of our promotional activity.
<unk> eliminated most of the store wide global promotions for fall 2020. This enabled us to drive sales and margin growth through targeted promotions, while still providing our customers the value of that come to expect from shoe Carnival. Our plan is to continue this strategy into 2021.
I am confident that we have a powerful leadership team in place that will guide shoe carnival to great success ahead.
Through our best in class merchandising marketing and store teams and our excellent vendor partnerships. We are confident in our ability to build on our success with that let me now turn the call over to Kerry Jackson to provide more insight into our financial performance for the fourth quarter and full year.
Thank you Carl.
Before I take us through financials from the quarter I would also like to express my gratitude for his steady leadership.
We would not be as this lease down as we are in a day without his guidance and commitment to driving results and improving margins.
Under <unk> leadership, we had an incredibly impressive year, given such extenuating circumstances.
We achieved record net sales of $253 9 million from the fiscal fourth quarter ended January 32021.
At increase of $14 million compared to the fourth quarter of last year.
Of this increase in net sales of <unk>.
$16 million was attributable to an increase in comparable store sales and $1 million was attributable to two of four new stores opened since the beginning of the fourth quarter of fiscal 2019.
This was partially offset by a loss in sales of $3 billion from the 14 stores closed and other non comp sales over the same period.
Comparable store sales decreased six 4% for the quarter on top of at three 2% comparable store sales increase in the fourth quarter of fiscal 2019.
Our e-commerce business sustained its triple digit growth and represented more than 19% of fiscal fourth quarter sales.
As Mark mentioned, our brick and mortar store sales were negatively impacted by customer concern related to COVID-19, and holiday sales crowds.
Our gross profit margin for the quarter was 38%.
Compared to 29, 1% in the fourth quarter of last year.
Of our merchandise margin increased to 160 basis points, while buying distribution occupancy expense was nearly flat as a percentage of sales.
The increase in the merchandise margin was primarily due to lower promotional activity during the quarter.
It was partially offset by higher shipping costs associated with the increase in ecommerce sales.
SG&A expenses increased $2 5 million in the fourth quarter of fiscal 2020 to $67 6 million.
As a percentage of net sales of these.
<unk> expenses were leveraged at 26, 6% compared to 27, 1% in the fourth quarter of fiscal 2019.
The increase in SG&A expenses was primarily attributable cost supporting increased e-commerce sales.
The effective income tax rate for both of fourth quarter of fiscal 2020, and 2019 was 28, 8%.
For the full year of 2020, the effected income tax rate was 25, 8% comp.
Compared to 21, 6% in the full year of 2019.
The tax rate in 2019 contained a one time benefit of approximately $1 9 million or <unk> 13 per diluted share associated with vesting multiple equity based compensation awards.
Net income for the fourth quarter was $7 4 million compared to net income of $3 5 million last year.
Earnings per diluted share for the fourth quarter increased by 28.
To 52.
Per diluted share.
Now turning to information affecting cash flow.
Depreciation and amortization expense was $4 1 million in fiscal fourth quarter compared to $4 3 million in the fourth quarter of fiscal 2019.
Depreciation expense from the full year was $16 1 million compared to $17 <unk> million for the full year 2019.
Capital expenditures for fiscal 2020, with $12 4 million with approximately $5 9 million used for new stores relocations and Remodels.
In fiscal 2021, we expect to spend 23 to 25 million on capital expenditures with a principal focus on the remodeling efforts Mark spoke about.
As Mark mentioned, we continue work closely with our vendor partners to strategically manage our inventory given current supply chain constraints. As a result, we ended the quarter with inventory of $233 3 billion, which is down $26 2 million compared to the prior year.
We're at $8, 2% on a per store basis.
As of January 32021, we had no outstanding debt and cash equivalents of $106 5 million.
Our borrowing capacity was $98 million at the end of the quarter.
Free cash flow was $61 million in the quarter, driven primarily by the reduction in inventory.
Due to the volatility this year no shares were repurchased in fiscal 2020.
As of January 32021, $50 million available for future repurchases under our board authorized share repurchase program.
The company plans of resumed the repurchase of shares under the repurchase program at fiscal 2021 under the assumption net general economic conditions will stabilize and to pandemic, we'll have significantly less impact on the companys performance and operations.
The company paid $5 1 million cash dividends during the fiscal year 2020.
The company announced last week that our board of directors has approved at 56% increase and at quarterly cash dividend the cash.
Quarterly cash dividend of <unk> 14 per share will be paid on April 19, 2021 to shareholders of record as of the close of business on April five 2021.
Given the continued uncertainty around COVID-19, and its impact on consumer spending behaviors and recent supply chain disruption, we are not introducing annual guidance at this time.
At being said, we are providing our initial view of first fiscal quarter for 2021.
Of the delayed tax refunds, along with severe weather throughout most of the country led to a difficult sales month of February. However in early March when our customers began receiving their tax refunds and stimulus payments our sales transfer rapidly shifted increasing to record setting levels.
Based on quarter to date results. We are currently anticipating a record first quarter at both sales and earnings if we continue to see positive sales trends the remainder of the quarter.
Sales from Q1 are expected to be a minimum of $273 million with diluted EPS of at least of $1 40.
This is at 54% increase over the 91.
And in Q1 of 2019.
While the rebound in March sales has been strong and concentrated the month to month variability in customer spending we have experienced during the quarter has made predicting the duration of this recent sales intensity difficult.
My final comments, a day or about the transitions happening at shoe Carnival.
Opened the call by saying the company is embarking on a new and exciting chapter.
I shared cliffs enthusiasm for the future.
While shoe carnival would not be what it is a day without the contributions by cliff and Tim.
Both planned for this transition by putting in place of talented individuals that they can seamlessly passed the baton to.
Our management team is strong and prepared for the future.
This concludes our financial review.
Now I'd like to open the call for questions.
Ladies and gentlemen, thank you for a question you will need to press star one on your telephone keypad again.
One <unk>.
Please standby, while we compile the Q&A roster.
Our first question comes from Michigan with pivotal research your line is opened.
Yes, thanks for taking my questions.
Congrats on the quarter and also congrats to cliff Mark and Karl on the transition.
Karl I think you've got the short end of that deal.
With me on this conference call at <unk>.
That is of transition im going to start with you My friend. So you were talking about some of the categories.
You kind of went through some stuff on women's non athletic and men's non athletic, but I don't think you gave the cost of those do you happen to have that.
Gain.
Gabe comps that were.
Both down on the <unk> I'm, sorry, hang up on the non athletic footwear.
For the quarter.
Comps.
Womens non athletic were down.
Low singles.
On men's non athletic low singles as well.
Great. Thank you.
Stimulus I'll just.
All of them for wants to take it.
Actually maybe maybe maybe Karen could you talk about so you've given you've given guidance on the quarter.
And that's just kind of two year basis, I think the sales were up 8% from from two years ago. I think last year is not a very good quarter.
To compare to.
Im just kind of curious you mentioned February was all Ralph given of refunds of weather and then Mark has been good as refunds of commented on stimulus of checked and is there any way you can.
Tell us sort of where you are quarter to date on their sales and then kind of what the assumption is for the balance of the quarter. Just so we have a sense as to kind of what youre thinking for the remainder of the quarter.
Well.
At the same way as you are Mitch we look at both comparison to last year of 2020, which is difficult because the stores were closed during this period last year. We're also comparing at back to more normalized 2019.
So we are seeing.
As you said February is tough because of weather of the delayed refunds will in March as soon as those tax refunds started coming out plus we had the double benefit of senior debt.
Incentive checks coming out of it.
So.
We built into implicit in the guidance, we gave it would be.
Approximately 90% comp increase against 2020.
Of more comparative look would be against 19 would be about at 9% comp increase built.
Built into our guidance on that now we are trending higher than that right now however.
We recognize that some of that stimulus of tax refunds and we expect it to slow down as we progress further through the quarter.
Got it okay. That's helpful.
And then also maybe for you Kerry so so again, if I look at this versus 2019.
The $2 73 at looks like sales up 8% I can kind of back end to an EBIT number that implies an operating margin.
Of close to 10% not quite 10%, but close to 10% and Thats versus I think 612 years ago. So that's a lots of <unk>.
Pretty big job, but I am wondering how much of that it doesn't I wouldn't take what's that kind of sales.
Sales increased over two years that a lot of that margin would be coming from occupancy leverage I would think it's probably coming out of the product margin side.
Maybe having to do with getting rid of of all the programs that you've talked about so maybe could you could you address those those margins or kind of how the margins are shaping up from the quarter and assuming that my math of Sao Paulo correct.
Your math is halfway correct.
So.
Got it pretty well, but it is being driven by great.
Great margins were driving at at retail we've been seeing sustained.
Second half increases in our product margins and we're seeing that flow through into Q1 also.
And Mitch Hi, it's Mark if I look at was built on.
At the comments, we learned a lot about.
Our customers and through our analytics, we pass at significant reduction of promotional intense from a throughout 2020.
Sure. Yeah. This Q1 at shared in my prepared remarks that we eliminated at all Bogo half promotion. That's one example.
And in doing so continue to be very pleased with the merchandize margin expansion at the sales acceleration.
So.
The strategy is working and we have great confidence that we can continue to make merchandize margin improvements and lower promotional intensity of those here.
Okay great.
And then maybe one for you I don't want to let you off the hook too easy.
Bankruptcies store closures of feel like Thats kind of been in the backdrop for the last couple of quarters.
I don't know if youre at.
Where do you want to speak to that yet.
But I imagine it probably helped a little of in the quarters, probably helping in the first quarter of just how do you see that competitive landscape right now.
Just to be honest with you.
Because we have.
At the right product in the right stores at the right level. So we are in the athletic business.
In the sandal business, where we're end of businesses at the customers are looking for so that I think that is.
That's number one two and three.
Really have not been able to.
Pinpoint the closures and say, yes that is best.
That's the reason our business has been driven at all happen at one time some of our business started to get really good is as you know last year at mid year end.
As we reopen our stores early.
And it just has continued.
Let me ask one more of ill jump back in the queue just Kerry.
On the SG&A line kind of thing.
About the cost structure. Your SG&A in 2020 was at a dollar wise was at that different than 19, even though the sales for the year were down close to 6% I'm just wondering how youre thinking about those SG&A line items.
In 2021 can you can you keep those dollars reasonably flat I mean, assuming you build out of sales analysis of Q1 looks like your sales are going to be quite a bit from from Q1 of last year I'm just wondering.
How maybe permanent or some of the cost cuts that you've taken at again it doesn't it doesn't seem like you guys really cut to the bone like some companies did in 2020 debt.
Your dollar $1 of sort.
Sort of flattish.
Well they are flattish what we saw was.
Increased SG&A on a year over year basis.
At the Group, Inc, Q2, three and four what we saw during the shutdown as we saw a reduction in SG&A and that's really where the.
The number that kept it flat with the prior year of 19 so.
Looked like.
<unk>.
True of Q1 to be more in line with the rest of our 19 that would be more in line with at what you should be thinking about.
Got it okay, alright, thanks, guys I appreciate it thank.
Thank you.
Our next question is from Sam Poser with Williams trading your line is open.
Good afternoon.
Carl I have to ask a question on your promotion.
The old.
As the new head merchant better than average.
Okay.
Well, Sam I think Theres, a store in North Carolina, and you need to ask that question into she's waiting for.
All of those.
As predicted and asked that question.
Okay anyway.
Speaking of North Carolina.
Hi.
Apparently Nike has made a number of decisions one of your larger to bake some cutability dose of stop selling from retailers later this year.
Especially.
A care a lot of based company there.
Given the 1000 stores there.
I mean was there anything that could facilitate opening.
At the store openings going more quickly.
It sounds like Youre back end Youre talking about back end of 'twenty, two to really get going here.
Hi, Sam it's Mark Great question.
As I said in my prepared remarks, we're taking spill at conservative capital approach for 2021, and we're prioritizing our investments on our multi year strategy to modernize our existing highly profitable stores.
Credibly excited about.
At the store experience that we are putting in place once of rapidly roll that out as fast as we can suddenly there was no COVID-19 disruption.
With that said we.
We're looking closely at every market, we compete in and looking for profitable opportunities law of consumers of that and if that opportunity presents itself. We are ready for rapidly move back ends of store growth.
We plan to reignite store growth.
Thats late 'twenty two.
In 2003.
That's our intent right now.
But if we find something faster we're ready to move.
Sure.
And then in ask here.
The stores are reopened.
Kind of or let's say in the fourth quarter, how how did this.
How does the stores comp versus I mean.
Are you of stores as productive of a more productive now than they were.
At 19, given the or are they less because of the influx of e-commerce and so.
When you go from with full year and I started doing this work you could really increase the productivity of the stores I.
I Wonder if that's a kind of a quick can you.
Is that how we should think about the productivity of the stores and then secondly, how sticky do you think this level of E Commerce revenue is.
Looking forward I mean, given the all of them with new classes of new customers.
God net everything else.
So during the year, we picked up over $100 million in E. Commerce sales of 175%, we did see some switching from our existing stores.
Yes.
We are starting to see the percentage of total company stabilize as consumer shopping habits are getting more and more predictable with further we get away from the start of Covid.
And we would forecast that at the store continues to drive as we talked about four wall contribution increases as a core part of our strategy in years ahead.
At victory E Commerce, while we're talking about approximately 19% of company value, we see that over the next two to three years.
At incremental sales from E com to the company.
Resulting at being in the.
Low to mid <unk> is what we anticipate in the next two to three years.
So this probably be of stabilization year as customers are pretty excited to get on box and get back out there in the stores and we're seeing that tremendous energy in our stores right now.
Which carry discussed.
Thanks, and then Carl.
Given the comps that you've driven and it sounds like you are driving right now and given all of the.
Supply chain issues that are out there.
How much have you narrowed the assortment targeted big big key items better get using all of the data and consumer insights you have.
Sure.
Versus 19, I mean, how.
Are the assortments narrow or in the stores are you going deeper.
Can you give us some color on that.
Sure Sam we started down that road I would say.
Really in a big way in 17, and we've continued to pare down the Assortments and make big items vendor in that since 2019 has continued and we are at a process now on big key items are big key categories. We continue.
Two accelerating unit sales beyond.
Frankly beyond our projections of where we've been in the past that will continue to be a core strategy in 'twenty, one and beyond.
Great.
Im sorry, Im asking so many questions but the.
But the merchant.
From chemical and commence here sorry.
Your your ended when do you expect the inventory to catch up here or do you think that gross margins will benefit from the entire year, because you're still going to be of permanent chase mode.
I think gross margins will continue.
Throughout the year, we are anticipating increases right now we're at.
We're at.
Anniversarying done at roofing Bogo with non Bogo, which gives you a natural margin increase.
We're chasing chasing product like everybody else, we're experiencing the same supply chain issues that everybody else is at this point, we're working with the vendors and constant communication that we certainly had a slow start to deliver spring, but I will tell you that the flow of product.
Has ramped up and is consistent with previous years at this point.
<unk>.
We hope to get.
A closer by at each quarter and as we move through the season are each month, Doug I should say.
Great and then.
But lastly, I mean this is Mike.
How is your relationship with Nike right now are you planning on putting in those Nike shops, I think youre, adding another 100 stores or so this year.
Are you planning on accelerating that as you remodel. These as you redo the stores modernize the stores.
And then I have one.
One last one for cliff just because I have two so I'll leave it for that question.
The same we.
We take great pride in providing a unique customer experience and we are continuing to invest in providing that most differentiate at athletic shopping experience in the channel and we have plans to continue to put.
That modern store design and as we proceed through the year.
And then cliff from given that everybody wants to pass the baton and your.
A new role as well.
Bye bye solely as vice Chairman, we're changing your name to Herald sale and Thats, what I of middle even with congratulation.
Thank you Sam.
Yes.
Our next question is from Greg <unk> with Sidoti Your line is growth.
Hey, guys. Thanks for taking my questions just two.
Youre, making the decision to pare back on Bogo is at.
<unk> data from <unk> 1 billion, an abnormal year end.
In an environment, where inventory at those kind of line what type of risk do you think you might be able to manage I guess from not alienating our core customer of years that was looking for that value. I mean, do you think you'll still be able to retain them as at a risk that you're aware of then going to manage.
Any thoughts on that.
Yes, we're monitoring it every week with our 26 million strong loyalty members were able to see if their purchase behaviors gauging NSO, we will adjust our tactics in the future. So far the recast data from multiple quarters at the height of the pandemic.
One of those coming down so at really low points.
Holiday and it works across all of those.
And we've decided to pass at for Q1, and we've taken that out of all of Q1 of its work consistently now youre spot on we need to monitor how the customer behavior continues to change.
<unk>.
Normal life, hopefully returns very soon but we're ready to pivot should we need to on a dime.
Great and then.
Not mistaken youre looking at 10 store closings. This year are those natural lease explorations and I know you don't have mall exposure of which a lot of retailers struggled with but is there anything kind of thematic in those 10 closings maybe there was at an anchor that debt was driving traffic.
For those located at those types of locations or is there anything with the real estate I should say specific to at that as sort of a trend within those 10 store closings.
First answer yes, their natural lease.
And dates.
Their stores debt.
We do not have accretive of four wall contribution of possibilities long term for us north of that customer base that really fits our CRM profile, where we have great opportunity. There has probably been up one broad sweeping commonality across them, but there are a handful within that that are.
Our very small format small square foot stores back at simply don't allow us to provide a differentiated unique experience as well as we would like to know and so we are closing those funds.
Great. That's helpful. Thanks, a lot.
Thank you.
Our next question is from Mitch Mark Smith petrol research your line is open.
Yes. Thanks, just a couple of follow ups for me.
Mark on the consumer insights I mean, it feels to me like you guys are still pretty early in that.
<unk> got a lot of.
People to your member program Youre of shoe Perks program, you've got a lot of data what's the what's the low hanging fruit over the next year or two as you take that information and.
Those learnings and what can you achieve.
That's pretty obvious to you guys right now in terms of drive of the business.
Okay.
I'll start with our excitement as we think there is multiple years of com.
Store growth in our existing fleet at the CRM program will open up and more profit rich lower promotional opportunities. So that we can get.
Continued sustainable shareholder value. So I think thats at the high level, specifically, though I'm really excited about how we're now able to segment our consumers so that Carl and I can personalize product offers to them at the big insight that we're shifting away from moves using our global.
Offer that gives everyone. The same offer because we don't know what's important to the specific consumer we're now getting with the number of Carmike and really think about the specific product of sub category.
<unk> given them an offer.
Message back that's attractive to them.
I'm very excited about our personalization capabilities and how we can leverage that from a year ahead.
And just to put that in context when did that start.
Quarter to end at or where exactly are what inning are you in that process.
Probably the second third inning now we have the capabilities of doing it as we're lapping into the second year of our CRM platform and.
We have a significant years ahead of us to continue to mine insights and grow profit themselves.
Big opportunity for US we believe for many many years to come.
We learned that we learned something due almost every day so.
Not only is it.
We had in the second and third day in some cases, where we are in the first day, because we learn something new about our customers.
As they continue to shop our stores.
And.
Just like the Bogo half promotion Bob.
One of our target our customers with the specific products that we know are categories that we know that they they shop.
We were able to eliminate continue to eliminate those both of the half days.
Which is the second thing that I think.
We're very excited about with these insights been hand, working closely with our strategic partners on where their consumers can best convert and how we think the health of them acquire the most important consumer to them or reactivate someone so I think our DIFM.
<unk> digital first capabilities, we're really helped the partners, who we value so much in value us as well.
Okay and then last question so were I guess of little over a year end of Covid now and I know you guys Athletic business has been particularly strong.
It was I think it was already sort of kind of evaluate pre COVID-19 and then I think a lot of of that would you have got some good.
Product, whether its price CT vision of our daiichi or whatever.
But I'm curious I think.
Aspects of of 2020, you might've been more COVID-19 driven whether it was like the slipper business or maybe things like hiking boots I'm curious for Karl as you think about lapping Covid. How are you thinking about kind of those.
Product opportunities, whether or not you think this year is just going to be kind of a continuation of some of the trends that kicked in last year because of Covid or do you think there's actually going to be sort of shift back to some things that didn't necessarily work as well, maybe not necessarily dress shoes, but but maybe some other stuff that didn't work so well in COVID-19, but now that people are.
Getting out and getting immunized and.
There's going to be social gatherings types of product there that debt.
Whether it's like going into Easter Memorial day, or fourth of July those type of events that you could sort of capitalize on that that didn't happen last year.
Sure Mitch what we're seeing right now obviously the continuation of the of the.
Covid product is leaded product and some of those things at drove Covid is a new debt on what the hiking category.
What's very encouraging is were seeing a.
Big uplift in seasonal new fresh seasonal product that has been delivered.
The customer desire to go out of fresh enough things. So we continue we believe thats going to continue throughout throughout the season.
Of the Atlantic.
Stuck with our increased selection fashion and athletic business should continue, but we think that seasonal sandal for spring.
We'll certainly take care of its already kicked at our respective.
Great encouragement that theyre going to buy those products at a 10 those events you talked about.
I almost don't want to say this but we're seeing a slight pick up.
In some fashion forward, maybe younger dress shoes today that maybe arent used for work, but they are used for social occasions at the minor checked out of it is the first one we've seen in over a year. So that gives us encouragement that the consumer's mindset of it is ready to go.
Get out there and get back from normal life.
Okay, Great alright, thanks, guys.
Thank you.
Our last question is from Sam Poser with Williams trading your line is open.
Real quick on capital allocation whats the priority.
You said youre going to you of reinstating the buyback.
Or are you willing to buyback.
Are you planning on buying back stock around these levels or kind of what's the real what's left.
The game plan there.
So same our priorities haven't changed first.
<unk> growth and as Mark talked about investing in of new store design and refreshing our stores, that's going to be our top priority with their capital and Thats why we are almost doubling our capex for the year end.
At almost entirely going to the remodeling process.
The board just increased the dividend by 50%, 56% so.
Felt that that was at priority the.
To put that out there and sort of long term belief in the company at.
And last.
<unk> of our capital allocation has been buyback shares really don't signal when we when we're at our buybacks like we said.
When will we see that the.
There is of clean economy going forward and we feel comfortable with it.
Then <unk> will be out there and buying shares back.
Thanks.
Look.
Thank you thanks, Dan.
Ladies and gentlemen, this concludes the Q&A session I'll now turn the call back over to Mr. Sifford for any customer.
Thank you I would again just like to thank everyone for joining us sort of the call today.
Hope you all are staying well.
One of the close by saying thanks to all of our shoe Carnival team and all of the work that they've done to elevate this company over the last nine years of particularly over this past year, we look forward to.
Speaking to you of all again.
Call in May Thank you again.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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