Q3 2022 Shoe Carnival Inc Earnings Call
[music].
Good morning, and welcome to the shoe Carnivals third quarter 2022 earnings conference call.
Today's conference is being recorded.
It is also being broadcast via webcast.
Any reproduction or rebroadcast of any portion of this call is expressly prohibited.
Management's remarks remarks may contain forward looking statements that involve a number of risk factors.
These risk factors could cause the company's actual results could 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 Companys 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 company disclaims any obligation to update any of the risk factors or to publicly 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'll now turn the conference over to Mr. Mark Worden, President and CEO of shoe Carnival for opening remarks, Mr. Ward you may begin.
Good morning, and welcome to shoe Carnivals third quarter of 2022 earnings Conference call. Joining me on today's call are Kerry Jackson, Chief financial and administrative officer, and Carl <unk>, Chief Merchandising officer.
As announced in this morning's press release shoe Carnival delivered earnings per share of $3 17.
During the first nine months of the fiscal year, which is more than double any full year of earnings for 44 years of operation except for one.
I'd like to thank our nearly 6000 team members for this accomplishment and their commitment to excellence for our customers our communities and our shareholders.
Throughout Q3 American households continue to face a challenging inflationary environment, putting pressure on the disposable incomes and on our traffic.
Despite the macroeconomic volatility the company's strategic plans to expand customer accounts and double operating profit margins versus historical levels continues to work Q3 earnings per share of $1 18.
We exceeded consensus expectations and profitability growth has continued to accelerate each quarter of 2022 progressed.
Our merchant organization in close partnership with our strategic vendors continues to deliver the freshest product assortments from our customers' favorite brands and eliminate unprofitable promotions.
Our operators provided exceptional customer service.
This resulted in Q3 operating profit margins of 12, 8% the highest results of the year and marked the seventh consecutive quarter in double digits.
Similar to Q2, we were encouraged that the Q3 operating profit margins delivered sequential growth above the 12, 4% operating margin achieved during Q2 and the 11, 1% in Q1.
To further illustrate the profit transformation. The company has achieved operating profit margin was 6.0% for the prior 10 year period.
As discussed in previous earnings calls throughout 2022, we've been lapping the stimulus impacted 2021 quarters.
The more normalized quarters with no stimulus benefits in 2020 to continue to provide management clearer visibility into the sustainability of our operating profit levels.
As such we are raising our operating profit margin expectations for 2022, and providing guidance today to achieve between 11, 5% and 11, 7% operating margins nearly doubling the companys prior tenure historical levels.
We believe the best way to understand the underlying sales and customer growth sustained at shoe Carnival. During these COVID-19 impacted and stimulus benefited recent years as the benchmark back to 2019.
Overall sales grew 21, 9% for the first nine months of fiscal 2022 compared to 2019 for.
For Q3 sales of $342 million achieved growth of 24, 4%.
Customer counts for our loyalty membership surpassed $30 million for the first time at the end of Q3, setting a new record of $31 5 million members up approximately 35% compared to 2019 and up over 10% versus 2021 to.
The continued growth of loyal customers is the strongest indicator that our brand is resonating with customers across geographies across demographics and across our multiple banners.
Looking at customer trends non athletic sales continue to be hot up 35, 1% versus 2019, and encouragingly athletic sales stabilized in Q3 up four 4% versus 2019, driven by improvements in inventory positions at <unk>.
<unk> supply chain challenges as the quarter progressed.
We will provide a comprehensive overview of category results shortly.
We're encouraged to share that earlier this month, we surpassed the $1 billion sales Mark in our Q3 sales of $342 million was the second highest sales result of any quarter in the corporation's 44 years.
During Q3 of 2021 the company grew net sales 29, 8%.
Compared to 2021 net sales retreated only four 1% during Q3 2022, holding over 24% growth from the stimulus infused prior Q3, and as said surpassing every other prior quarterly sales results.
With $3.17 of EPS achieved during the first nine months of the year at approximately 10 weeks left in this fiscal year. We are on track to achieve earnings per share between $3 95.
And $4 10.
With that said, we expect our customers face a historically high inflationary environment throughout Q4 and throughout this holiday season, which will put pressure on their disposable incomes and likely on our traffic as such we anticipate the most likely outcome is to deliver sales on the lower side of our annual <unk>.
'twenty two guidance and to deliver EPS on the mid to lower side of our annual guidance.
Moving on now to an update on progress toward our key strategic plans.
First we continue to make significant progress on our fleet modernization program our plan to have over 50% of stores modernize by the summer of 2023 is on track with 41% complete currently.
In addition to the moderate shoe Carnival experience rolling out now where grand opening a shoe station modernize prototype store later this month, our new store openings in both Alabama and Georgia.
Second our shoe stations banner continues to outperform expectations on all fronts.
Sales surpassed $75 million during the first nine months of 2022.
We continue to expect Schuh station sales and profits to exceed our original full year expectations of $100 million.
And 10% operating profits by the mid single to low double digit range.
Our integration efforts of the recently acquired better continue to pace ahead of our preliminary timelines.
We're starting to realize significant back office synergies as well as gaining efficiencies and best practices across merchandising operations and marketing.
New store site identification efforts continue to progress throughout the south and we expect the growth of 21 store chain acquired to approximately 30 stores by the end of fiscal 2023, and we aim to surpass 100 stores during the 2026 to 2028 horizon.
To note two new stores tentatively planned for January 2023, soft openings were shifted to spring of 2023 openings to enable the rollout of the new two station store prototypes designed and to open with the freshest spring product Assortments.
Third we continued to elevate our advanced CRM analytics, and digital marketing capabilities, which allow us to have one on one communication with our customers.
These highly profitable tools give us a targeted platform to reach our customers via text and email and we're able to drive sales at attractive margins and without deep unprofitable promotions.
During Q3, we completed the shoe station integration into our CRM organization and platform technologies, we extended our shoe perks loyalty program across both banners and are nearing the final development stages for the new shoes station Dot com rollout, which is targeted for holiday 2022 or <unk>.
Early 2023.
Many wins have already been achieved such as adding over $1 million shoe station customers as a part of our loyalty program.
With this data in hand, we've been able to confirm that the core shoe station customer demographics aligned with our initial expectations. When it was acquired that have a higher income suburban customer that is proving out to be resilient to the current inflationary environment.
Two major customer advantages are now starting to be leveraged for incremental sales locations and increase loyalty.
<unk> customers can now earn points and rewards at either of our banners and redeem those rewards across either banner.
Second we now can introduce all of our 31 5 million customers to our new banner to provide enhanced product assortments and pricing tiers and to provide them more store locations to conveniently shop.
Fourth we are planning to expand the scale of our store footprint of both banners over the next five years.
The shoe Carnival enterprise is on track to operate over 400 locations during 2023 and targeting 500 plus stores in the 2026 to 2028 horizon through organic expansion and targeted M&A activity.
We see the largest white space opportunity for store growth is with our recently acquired Schuh station better and a shared earlier, we aim to grow to over 100 shoe station stores into 2026% to 2028 horizon.
Based on real estate availability with our targeted demographic and the timing of attractive new developments and strategic geographies.
We anticipate approximately 10, new stores in 2023, and then acceleration in 2024 and beyond.
In conclusion Q.
Q3 marks the seventh consecutive quarter of double digit operating profits customer accounts climbed to the highest level ever surpassing $31 5 million loyalty members.
Earnings per share year to date has more than doubled all but one of the prior 44 full year results and we are on track to deliver against our EPS and our strategic targets for the remainder of fiscal 2022 with that said I will ask Carl to discuss our performance further Carl Thank you Mark as Mark highlighted.
Today's results are strong evidence that our strategy is working.
During the third quarter, we experienced a 50 50 athletic and non athletic sales balance. This was a shift of 700 basis points to the non athletic category compared to 2019, we anticipated this move and consumer demand to the non athletic product and position inventory.
Take advantage of this fashion chain.
Supply chain continues to issues continue to impact athletic inventory availability early in the quarter. However, we did see improvement in the athletic footwear deliveries as we move through the quarter entering into the fourth quarter inventories by category are in line with forward sales expectations.
Our outstanding team of merchants continues to diligently manage the supply chain and looking ahead, we believe the supply chain issues, we've been dealing with for over two years will continue to improve to a more normalized state as we move into fiscal 2023.
At quarter end, our inventory forward weeks of supply was in line with 2019.
Importantly, both aged inventory in seasonal carryover inventories are in line.
As a result, we do not have a glut of inventory and see no need to provide deep discounts are dumped goods in the fourth quarter.
Turning to the results as mentioned our anticipated shift from sales in sales from athletic category should not Atlantic categories continued in the third quarter.
Sales in non athletic categories were up in the mid <unk> versus 292019 and sales of athletic footwear were up in the mid singles.
Sales versus 2021 were up in the mid singles for non athletic and down in the low twenties for athletics.
By Department Women's non athletic was up in the mid Twenty's versus 2019.
Sales were driven by dress up in the mid Forty's sport up in the mid Thirty's.
Sandals up in the high Twenty's.
Mens non athletic sales were up in the high <unk> versus 2019. This was driven by mens casuals up over 50%, which further reflects the consumers move from Atlantic to non athletic footwear for the back to school time period.
Men's boots were up in the high <unk> and mens dress was up in the mid teens compared to 2019.
Shoe Carnival continues to be the retailer of choice for childrens footwear in the markets. We serve children's non athletic sales versus 2019 were up in the high Sixty's.
Children's Casuals drove increases up over 100% and inputs non athletic sales were up in the low sixty's.
Sales in children's athletic were up in the low teens and adult athletic were up in the low singles versus 2019.
With the fashion trends, we are seeing in the approved product flow, we anticipate strong sales results and the non athletic categories for the remainder of 2023.
Excuse me 2022, as we have seen in the past seven quarters, we continued to deliver excellent product margins. These product margins continue to run up over 700 basis points versus 2019 and are a result of our transformational promotional strategy, we continue to use.
The data provided from our best in class CRM program to drive loyal customer growth. This data provides us valuable insights into our over 31 million customers and enables us to engage with these consumers through smart effective promotions that are not margin dilutive.
The success, we have seen utilizing the strategy has been a key factor in our sales and margin growth.
As we move into the fourth quarter, the non athletic categories traditionally increase in penetration to total sales.
Our inventory position in those categories is much improved versus last year, our seasonal boot inventory position is much better than last year, and our athletic inventory levels and freshness are the strongest they've been throughout 2022.
With that I will now turn the call over to Kerry for a review of our financials Gary.
Carl.
I'm excited to share with you the financial highlights from another successful quarter, which again demonstrates to transform and sustainable profitability profile for the company.
Similar to previous quarters. This year I'll be comparing results versus 2019, as we see it as the most relevant and normalized period prior to start of the pandemic.
Net sales in Q3 were $341 7 billion, which were the second highest quarterly sales in our history surpassed only by Q3 last year.
These sales increased 60, 701 billion or 24, 4% compared to the pre pandemic third quarter 2019, driven by sales from the shoe station banner and a comparable store sales increase of 18, 3% for the shoe Carnival banner.
This is the highest quarterly comparable store sales increase for the year.
Q1, increasing 16, 8% in Q2, increasing eight zero percent, resulting in a year to date comparable store sales increase of 14, 4%.
Our Q3 gross profit margin was 38, 3%.
740 basis point increase compared to the third quarter of 2019.
An increase in the merchandise margin of 760 basis points was partially offset by a 20 basis point increase in buying distribution and occupancy costs.
SG&A expense in Q3 was $87 3 billion or 25, 5% of sales compared to $66 6 million or 24, 3% of sales in Q3 of 2019.
The increase in the SG&A was primarily due to investments in advertising and store level wages, along with the expenses for the shoe station banner acquired last year.
Q3, operating income was $43 6 million or 12, 8% of sales.
This is in line with our expectation of annual double digit operating margins, which are more than double of our historical run rate.
Net income for the third quarter of 2022 was $32 7 million or $1 18, and diluted earnings per share an increase of 151% compared to the third quarter of 2019.
Excluding the stimulus enhanced 2021. This is the highest quarterly diluted earnings per share in our history.
For the fourth highest including 2021.
We closed out our quarter with inventory of $392 3 billion.
Which is up $94 3 million compared to the third quarter of 2019.
Approximately 40% of the increase in inventory. This for Schuh station stores acquired last year were opened this year and in transit inventories.
Net of these increases inventory is 19% higher than the end of Q3 of 2019 the.
The increase in inventory is supportive of the 21, 9% increase in net sales compared to 2019 and the expectation of increases in sales for the remainder of the year.
During the third quarter, we repurchased 451638 shares at a total cost of 10.0 million.
We had $19 $5 million available under our repurchase program, which expires December 31 2022.
Summarizing our expectations for 2022 fiscal year <unk>.
We expect sales to range from $1 27 to 130 billion grew.
Gross profit margin to be approximately 37.0%.
Operating income margin to range from 11, 5% to 11, 7% and diluted earnings per share to range from $3 95 to.
At $4 10.
Implied in our annual sales guidance Q4 comparable store sales are expected to increase between 14 and 26% compared to Q4 2019.
However, as Mark mentioned earlier, we are cognizant that our customer would be challenged with higher inflation in Q4.
Based on this outlook our year to date performance and fourth quarter expectations. We are more comfortable with the mid to lower range of our annual guidance.
In closing our third quarter results are a continuation of increasingly sustainable profitability for shoe carnival compared to pre pandemic levels.
We are confident in our ability to execute the remainder of the year and we are poised for long term growth through a combination of organic store expansion and modernization and selective acquisitions.
This concludes our financial review now I'd like to open up the call for questions.
At this time I would like to inform everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your first question comes from the line of Sam Poser with Williams trading.
Thank you for taking my questions.
Morning.
First of all Carrie just some housekeeping can you give us the merch margin and the <unk> leverage year over year instead of going back to 19. Please my math is not that good.
We our merch margin increased 760 basis points for the quarter, and we Deleveraged <unk> by 20 basis points.
Versus last year.
No against 19 can you give us versus last year year over year.
Good morning.
Let's see we were.
Our merch margin was down 70 basis points.
And we.
Sure.
Yes.
Deleverage here at <unk>.
By 140 basis points.
Thank you.
Then.
Can we talk a little bit about the inventory levels and sort of what.
Given that sales total sales on a year over year basis, we're down in the quarter and I understand how inventory was last year, but you did a lot with <unk>.
Yes last year.
How do we see what is the optimum turn inventory turns for the company.
Okay.
Okay.
On annual basis.
Okay.
Sam I don't I don't know that were ready to give that information with with the shoe station banner coming online.
And how that business is going to accelerate with store openings.
I know that the inventory levels, a year ago, where we're pretty much.
We're spotty based on deliveries, we feel comfortable where we are today and where we're plan going forward to achieve our goals.
Bob.
Okay and then.
Just for the sake of definition, because you guys everybody defines it a little differently Karl could you.
Discuss sort of in that.
Okay.
Sport.
Which is your non athletic.
Sort of sport casual product could you give us some like if you move that.
Can you give us some examples you don't have to tell me Brad.
Some examples of what would fall into that sort of ask not what you would view as non athletic, but it's more sport oriented while some of your competitors I believe may have those in the athletic category.
Well can you get the idea.
Yeah, Sam the way we look at it is if you can play a sport you can run you can.
I worked out in it if it's something that that you can do physical activity in its in the athletic area. If it is as an athletic field, but its not functional it goes into the support area.
And how would a what we're able to walk into <unk>.
It depends on it.
It depends on if it is a true technical walking shoe or a more of a casual walking ship.
Got you, Okay, we're not going to get anywhere with that.
Yes.
Can you give us some idea.
You mentioned that the supply chain was getting better.
Could you could you could somebody dive into that a little bit.
Hi.
Just give us some more color there as well.
Sure Sam.
<unk>.
We're seeing more consistent on time deliveries on product that was placed.
As we move into third and early fourth quarter.
Across all categories of footwear over the last 12 to 18 months it was spotty depending on the category.
It was Atlantic whether it was non athletic attended to swing back and forth based on the timing and production and country of origin in Covid.
We're not seeing that anymore, we're seeing.
Products in all categories of footwear athletic and non athletic being available on time based.
Based on the way we placed the orders.
Sam I'll add to that from a standpoint that cost standpoint, we're seeing in the first half of the year, we saw a <unk> in our supply chain due to fuel and transportation costs of over 300 basis points Q1 and Q2.
This past quarter. It was a little over 100 basis points and we're expected to see that.
Drop a little bit in Q4, so we're seeing cost savings also as the supply chain appealed.
And.
I know it's tiny.
I know its a tiny amount of business.
You've done so far in the quarter and the big and the huge weeks are coming up but.
Can you give us some color on.
On sort of I guess, how it's going.
How much did the first couple of weeks and form.
The guidance or is it just.
Any color you can provide there.
Sam you hit upon is that it's really hard to get any guidance at this point because the big week. The sales are ahead of us. So anything we're seeing right now is it not really material to our overall expectation of what the quarter is going to be turn out to be.
And in the fourth quarter historically what is.
Athletic to non athletic be it then.
And boots.
Within that as well as a percent of sales.
Boots in the non athletic categories for the quarter tend to run about 45% of the total of the women's and the children's non athletic business.
Yes, I don't have the number in front of me, but typically non athletic versus athletic in the quarter, where we have been a 50 50 business tends to drop to more of a 60 40 not athletic business.
And based on what you've seen on the overall trends do you expect.
And how you bought it do you anticipate that we could see $65 35. This year is it sort of go in that direction.
From the non athletic athletic into this fourth quarter.
Sam that'll be determined really by weather.
And as we move through the quarter.
The weather has a major factor in the boot penetration.
And.
Well, there seems to be turning colder and we will see what happens.
And you bring up a good point and then I'll get off the over the last six or eight weeks, we've seen the weather gets cold that get warm the Nicole did your trends in those category in that category, followed that because I've heard from other retailers that they were feeling great about.
Five weeks ago.
The weather was cold then it got warm and they were growing and then getting colder again, theyre feeling better or you.
Are you seeing.
Have you seen the same.
Kind of roller coaster over the last call it six weeks or so sharply.
We certainly see the weather always has always playing a factor and you have to look at the weather. This year last year, but it's flip flopped, a little bit what I know is we have great boot inventory, we're in a much better position than we were from a delivery.
Standpoint from a year ago.
And we fully expect.
Once the weather.
And we just have seen some movement into weather stays consistent we.
We think we are ready for a great holiday season, and the boot categories.
Alright, thanks, very much continued success.
Question comes from the line of Mitch comments with Seaport research.
Yes, thanks for taking my questions.
Carry on Q3.
I don't think you gave the comp on a year over year unless I missed it I think you've only given a three year what was it versus last year and then can you also give us the months or maybe just a little bit more color on how the months played out for the quarter.
Yes.
Mitch we were down 999, 9% against 20.
'twenty one.
And what we saw was that it was fairly consistent that level, except October increase over the average.
Okay, and then just back to Sam's question I know that the first couple of weeks of October are small, but is that trend from October continued into November or has it gotten better worse.
Mitch.
We typically give.
Information has the quarter starting on its relevance to the overall, so we don't shy away from doing that.
It really is immaterial whether positive or negative at this point in time really.
It really will start to see.
Dan.
That's real.
Real dollars of sales to start having so the trend right now is it is not realm.
Relevant to our guidance.
Sure.
But there is on merch margin.
I should say gross margin.
Youre seeing 37% for the year are back into something Thats kind of in the high 37% range for Q4, which would be up.
800, 5900 basis points on a three year that would be an improvement over kind of what the trend has been through the early part of the year can you talk a little bit about that and maybe also in the context of kind of how youre thinking about promotional activity in the fourth quarter.
Mitch you're correct in those numbers.
The way, we're looking at it as that.
Carl talked about how we would expect it to go from athletic and non athletic in the fourth quarter. So I have a higher penetration of non athletic we drive a higher merchandise margin on our non athletic part of the business. We also as I mentioned earlier that we're seeing are applied.
Apply chain cost and our leverage of our E&E no.
In displays so now we would expect to see at the low end of our guidance leverage on our D&O slight leverage in Q4, which again helps that overall gross profit margin.
Okay.
Just a few last things.
Carl on the athletic business I think you said it was like down 20% year over year in the third quarter can you maybe speak to how constrained you are in athletic on the <unk>.
Inventory side.
How that's changing for Q4, and how that might impact your <unk>.
Our outlook for athletic in Q4.
Okay.
Sure Mitch by early in the quarter as we came through those big back to school early weeks deliveries were a bit late.
So scrambling on getting product in those big.
<unk> hurt us a bit as we moved into later in the quarter. Our inventory is much more in line and in today.
With October deliveries setting us up for holiday our inventories in the best shape from a freshness fashion.
And quantity standpoint that it has been throughout.
Probably the last year, so we feel pretty good Zach the Atlanta consumers out there, we're going to get our share.
And can you also remind us how challenged you were on the boot inventory last year.
Fourth quarter, if I recall correctly there there are a fair amount of things that didn't actually ship until the receipts until the first quarter, yes, exactly exactly boot inventories.
We're down significantly.
Last fourth quarter.
I would say.
All I would say a quarter of the boot inventory didn't hit in time.
To really take advantage of it during the meat of the season.
Okay, and then just a couple of last things.
We've kind of gone through a lot of vendors reporting earnings the last month, or so and some of them have talked about excess.
Which has resulted in some cancellations other others have talked about offering some of their.
Wholesale partners discount so I'm just wondering Carlos.
If youre seeing any any good deals out there on.
On inventory is maybe some retailers are working through some excess and if thats, having any impact on the.
On the margins in the fourth quarter, if you are bringing in some good deals.
We we take advantage of opportunities when they are presented to us and they make sense.
I would say that there is no more theres no look more of an increase in that category than there has been in the past.
There is a lot of product in and people, while its vendors and retailers are flowing products.
As we move through the remainder of the fall season to end all the way into first quarter.
But it really is.
It's really based on category Mitch outerwear, those overages are but we don't see.
Ah.
A big increase promotional activity either from opportunistic buys for the fourth quarter or having to dump inventory because of a problem inventory.
Okay, and then lastly on the.
On the loyalty I think you said that now.
Shoe Carnival and shoe station are integrated and.
Customers have either banner can use points to redeem.
Either banner.
Im curious what youre seeing like Salt Lake when exactly did that happen.
I'm curious to see what youre seeing on.
On the shoe station side.
A lot of shoe carnival customers become aware of shoe station in kind of different product assortment being offered there.
We're thrilled mentioned 31 5 million customers across two banners.
Of over 35% for three years. So we have a critical mass now to market cross banner across geographies across price tiers and Assortments, it's too early to really share anything insightful as it just happened towards the end of Q3, but were getting that data in hand of over $1 billion.
<unk> station customers now and we've learned what we hoped to have learned when we acquired them first that are highly affluent customer secondary or suburban customer and third they are coming from geographies across the markets, where shoe carnival largely does not compete and was a space we wanted to.
Enter.
So thats, allowing us to figure out how to move quickly from our current store count So as I shared our aim to have over 100 stores opened by about 26% to 28 time horizon.
Lots more to come from that.
This a lot more long term sales a lot cross.
<unk> and we're really just at the first pitch of the first inning of leveraging all of the upward sales and profit opportunity from this new integration.
Alright, Thanks, guys. Good luck for holiday.
Thank you.
Next question comes from the line of Jim <unk> with <unk> Crespi Hardt.
Good morning, Thanks for taking my questions.
First just wanted to ask.
Last quarter, I think you said shoe steering should be 10% above your initial sales expectation for the year and now it looks like it could be a little bit lower than that so just any color around the reduced outlook at least on the low end there.
Yes, Hi, it's Mark I would just say we're widening the aperture.
<unk> expected to beat all of our expectations profits are coming in strong.
We're finalizing our supply chain integration right now and really starting to leverage merchandising insights to drive for higher profitability. So we've widened the aperture.
<unk> account for any miner.
Changes that go through the supply chain. During this moment of time at Q4, either way, we're guiding towards beating the original $100 million.
10% operating profit.
The mid single to low double digits, just widening the range a little not lowering okay. Thanks Darren.
And then whats the launch.
E Commerce, if you have one.
Yes.
We're in great shape, the shoe station Dot com.
Launch is in the final testing phase Similarly, we're making sure the supply chain is flawless before we turn it on.
We need an outstanding experience and we think we're very close it'll either launched just in time for this holiday.
Bill fine tuning the supply chain side of that then it will launch in early Q1, but.
We're thrilled with what we're seeing and ready to ensure a flawless customer experience in the next couple of months if not the next couple of weeks.
Okay.
And then just your merchandize margins are holding up great.
Any color you can provide on.
The industry promotional activity, you're seeing your competitors from your vantage returned to historical promotion levels.
Okay.
Hi, Jim it's Carl depending on the retailer, we're seeing some of that.
We're seeing it really done by our global promotions.
Which is something that we have eliminated from from our marketing strategy.
With additional coupons and.
Value total messages.
<unk>.
And then.
Our direct competitors were actually not seeing as much of it but we're seeing it with some of the big nationwide retailers that are trying to move inventory or stimulate traffic in the stores.
But at this point, we're comfortable where we are and we think our margin goals are well within reach for the quarter and this is mark let me add one more point historically shoe Carnival had run well over 40 weeks a year of the buy one get one half off promotion during the course of the year. This year, we've run none and <unk>.
<unk> been pleased posting the seventh consecutive quarter.
With double digit operating profit and as we've shared the Q3, our most important quarter of the year was our second strongest sales in history. So we're confident the strategies working while other retailers in our space continued with that outdated buy one get one half off.
Year round and many other competitors punctuated it is during back to school, we stay true to what we said, we're going to sustained double digit operating profits and we're going to grow by targeted loyalty enhancements case in point. The now achieving 31 5 million people, we can talk to about what they want not just give.
The way, our best product that achieved price.
One more thing Jim I'll add there.
Fourth quarter, we know in certain categories as a promotional quarter, we buy for that to run those promotions and make sure that the results of those promotions Act.
Activity is not margin dilutive. So promotions you see from us from the fourth quarter are all planned and baked into the forecast.
Great.
And then just.
Whats the Capex requirement to fund.
New store growth next year as well as the Remodels.
And then what's kind of your thoughts on buybacks.
Like that higher Capex requirement next year. Thanks.
We.
Did it were expected due to the little over $70 million in Capex This year, and Thats really being driven by the number of Remodels the modernization of our stores that we're doing.
We're leaving ourselves some flexibility next year, we expect to have less capex.
Between new store growth and the Remodels, we should expect somewhere between $50 million to $60 million in.
And Capex.
Between the two.
Okay, and then just kind of big picture thoughts on the buyback you got back in the market this quarter, but going forward, how we think about them.
The same as we always have is that our first size how do we fund growth and are there any opportunities. There then we fund our dividend and if we have excess cash that we don't think we're going to need to deploy and we can we can.
New build cash later, then we'll do a buyback when we see the stock being.
Unfavorably viewed by the street.
We'll still be opportunistic in the future.
We're really focused more on the growth side of the business and as we transition to store growth next year, that's going to be our primary focus.
Thank you.
Yeah.
Question comes from the line of Sam Poser with Williams trading.
I have two follow up questions one we.
We recently.
And the last week or so saw a buy one get one on some boots.
And then it looked like they were brands I didn't recognize.
Was that one of those planned events call that we just saw online that.
It looked around 11, 11 or something like that.
You are correct Sam.
That was a planned promotion on a select group of boots, and they were purchased specifically for that promotion.
As we have done in the past.
Okay.
Mark.
Or both Martin Currie the.
I think that.
You said a couple of stores from.
Shoes station moved from Q4 to Q1 is that correct.
That's correct Sam.
Two out of the end of January into Q1, so we could ensure that we open them with our new store prototype.
Versus have an outdated and have to remodel it down in the future.
So there was no impact from that's a de minimis impact from that store opening change too.
The widening of the.
Guidance for Schuh station.
Nothing material.
To open the last week of the fiscal we're just being transparent that the store count. We had said would be 400 is now going to be 398 with those two moving out shortly to meet the prototype.
Got you Okay. Thank you very much thank you Sam.
This time there are no further questions I would like to turn the call back over to Mark Gordon for closing remarks.
I'd like to thank you all for joining our Q3 call and wish you all a very happy Thanksgiving ahead.
And healthy holiday, we look forward to talking to you all again at our Q4 year end call.
This concludes today's conference you may now disconnect.
Okay.
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