Q4 2025 Shoe Carnival Inc Earnings Call
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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.
Today's call will reference non-GAAP measures.
The non-GAAP or adjusted results referenced exclude the purchase accounting merger integration and transaction costs related to the acquisition approaches shoes.
A reconciliation of GAAP to non-GAAP results is included in today's earnings press release.
I'll now turn the conference over to Mr. Mark Worden, President and CEO of shoe Carnival for opening remarks. Mr. Ward then you may begin.
Good morning, everyone and thank you for joining us today for shoe Carnival fourth quarter 2024 earnings conference call.
Speaker Change: Joining me on today's call are coffee, better Chief merchandising officer, and Patrick Edwards Chief Financial Officer.
Speaker Change: We're excited to share our fiscal 2024 growth results with you today and discuss the transformational news announced this morning about our shoe station growth strategy.
Speaker Change: First I'll start with a brief overview of 2024 trends and results.
Speaker Change: Over the past few years, our industry has faced a challenging landscape with inflationary pressures constraining purchases among lower income households, and urban consumers.
Speaker Change: We've seen footwear customers shop at high engagement levels during key event periods, such as back to school and holiday and then pull back spending and engagement during non key periods.
Speaker Change: Despite the many headwinds our customers and industry faced last year.
Speaker Change: Long term strategies.
Speaker Change: Our results apart from the competitive set and enabled us to deliver industry, leading sales growth during fiscal 2024 and achieved net income growth.
Speaker Change: We remain disciplined throughout the year relentlessly focused on maximizing margin delivery cost controls synergy capture profitably engaging customers and bringing in the nation's best brands to market.
Speaker Change: We gained market share again in 2024, we enter new geographies expanded our customer base and acquired a regional leader in the Midwest.
Speaker Change: Our balance sheet started fiscal 2024 strong and got even stronger by year end <unk>.
Speaker Change: We expanded our cash flow generation and built up higher year end cash balances during the year. We also acquired a chain from 100% cash on hand.
Speaker Change: We provided shareholders, our 50 <unk> consecutive dividend and for the 20th consecutive year, we started a year with zero debt and ended the year with zero debt ultimately our strategies resulted in net income growth and EPS results at the very high end of our profit guidance range.
Speaker Change: I'd like to thank our exceptional vendor partners and team members for all their efforts to achieve these results during a tough year.
Speaker Change: Turning to a few highlights of fiscal 2024 results.
Speaker Change: Net sales were $1 $2 billion this year growth of two 3% this.
Speaker Change: This contrast to the industry contracting mid singles for the year and reflect solid growth, particularly given this was a 52 week year compared to a 53 week in the prior year comparison.
Speaker Change: Our shoe station growth banner grew an industry, leading five 7% successfully entered new markets capture new customers and achieve comparable growth for the year.
Speaker Change: <unk> achieved profitable results beyond our expectations with integrations completed well ahead of target and full synergies captured.
Speaker Change: The contributions from these two acquisitions drove our overall sales growth and led to achieving the high end of our EPS guidance for the year.
Speaker Change: Our digital first marketing approach continued to drive highly profitable growth and efficiencies, particularly during event periods, where we achieved sales growth during both the Thanksgiving and Christmas holiday period, similar to growth achieved earlier in the year during back to school and spring events.
Speaker Change: During non event periods customer trends remain unchanged with a lower income customer at our Carnival banner.
Speaker Change: We continued to see customers pull back on spending in the industry and these non event periods.
Speaker Change: Carnival contracted at similar levels as the broader industry declines during fiscal 2024.
Speaker Change: Looking at these first months of 2025, which are non event shopping months.
Speaker Change: Could you share the trends have not changed and we expect this downtrend persist this year with lower income customers in non event months.
Speaker Change: Additionally, the 2024 boot season was a disappointment with unseasonably warm weather in Q3 lingering late into Q4, and then an average customer response for the balance of the year.
Speaker Change: Boot inventory dollars are down around double digit currently versus last year with smart inventory management.
Speaker Change: We achieved gross profits over 35% for the fourth consecutive year with a steady focus on targeted smart promotions and buys that maximize margins and conversion.
Speaker Change: Adjusted net income grew to $75 million or $2 72.
Speaker Change: First is $74 million or $2 70 in fiscal 2023.
Speaker Change: Patrick will provide additional commentary on fiscal 2024 results.
Speaker Change: I'd now like to turn to what I believe could be the most transformational strategy in our company's 46 year history. This.
Speaker Change: This morning, we announced a new strategic plan to scale up shoes station from a regional retailer to a national footwear and accessories leader.
Speaker Change: We will review the first phase of this plan the investments the expected payback period financial leverage and thoughts on following phases.
Speaker Change: Two station is our premium retail banner, attracting higher income households, providing customers the top branded assortments for both non athletic and athletic branded footwear high levels of service and a welcoming contemporary shopping environment.
Speaker Change: Since we acquired Schuh station in 2021, we've been evaluating customer analytics market data and developing strategies to expand the chain beyond its roots in the Gulf region of America.
Speaker Change: Over the past two years, we've been expanding station into new markets and it has become the industry's fastest growing retailer and solid market leader in the southeast where it competes.
Speaker Change: As discussed in prior calls we conducted an extensive and market test to validate what our customer and market data indicated that shoe station with better meet customer needs and shoe carnival in many markets we operate.
Speaker Change: We methodically went about testing this including closing 10 underperforming shoe carnival stores across multiple markets and opening 10, new shoe station stores.
Speaker Change: After a full year of testing and analysis I can share. The test is now complete and it is clear that shoe station was preferred by customers to carnival.
Speaker Change: This creates a transformational business opportunity to invest now to accelerate our future earnings potential.
Speaker Change: The overall results from the 10 re banner stores exceeded our success criteria combined they generated sales over 10% higher than shoe Carnival expanded margins attracted higher income households, converted new customers and ultimately delivered a double digit increase in profits excluding closing in.
Speaker Change: Opening costs.
Patrick will unpack the payback model for this strategy, but I will share that the return on investment is high fast and currently is our best usage of our solid cash flow to drive organic growth.
Speaker Change: We originally planned for 25 re banners this year and then a gradual expansion over many years.
We now believe that is too conservative and approach based on the customer response financial accretion and the continued headwinds we anticipate the lower income households face this year.
Speaker Change: We will move swiftly with executing our transformation plan in order to capture future earnings and market share within.
Speaker Change: Within 24 months, 51% of our current store fleet will be operated under the shoe station banner.
Speaker Change: Let me break out the specifics in a little more depth.
Speaker Change: During this fiscal year, we have increased the re banner store count to 50% to 75% from the 25 originally planned.
Speaker Change: Growth. This year will include markets, where stations already well known to customers in the south as well as entering new markets, where we operate a shoe carnival.
Speaker Change: This will result in station representing between 22% to 27% of the company's total store count by fiscal end versus a little under 10% at the start of this year.
Speaker Change: We will rebound or 100 or more stores between the start of fiscal 2026 and April 2027, resulting in 218 shoe station stores in 24 months at that point, we believe our growth banner has the scale needed to offset the negative trends of the carnival banner and lower income customer.
Speaker Change: Headwinds.
Speaker Change: During 2026 2027, we will begin testing shoe station in regions. The company does not compete meaningfully or not at all.
Speaker Change: We will be evaluating these markets over the year ahead and expect to have information to share on these expansion markets as we get into 2026.
Speaker Change: To be clear we see this 24 month plant is just the first phase of shoes station scaling up.
Speaker Change: Based on our customer data industry, leading growth achieved for the past two years enthusiastic vendor partners and profit potential we intend to scale shoe station nationally over the long term horizon.
Speaker Change: The profit leverage of this plan are substantial for long term earnings accretion and will receive our prioritized investments in 2025.
Speaker Change: Patrick will provide the details but the headline is the year one investments to scale. This plan up total to approximately 65 reduction in EPS this year and the downtime for the $50 to 75 store closures and reopening amounts to approximately 1% sales reduction during the year that.
Speaker Change: That near term investment is expected to pay back fully in a two to three year horizon and increase our annual profit contributions of these stores by over 20% in 2027 said differently in the second full year. After re battering, we expect store profits to increase over 20%.
Speaker Change: In addition to our organic growth strategy, we remain committed to pursuing M&A to achieve our long term vision to be the nation's leading footwear retailer for families.
Speaker Change: We start this fiscal year, and our competitive position of strength with a strong balance sheet and robust cash flow generation.
Speaker Change: Our two prior acquisitions have integrated smoothly full synergies captured and built our readiness for further acquisitions when the right opportunity at an attractive valuation becomes available.
Speaker Change: Our M&A targeting focus is on market, leading footwear retailers with scale, providing geographic expansion and or diversifying to a higher income customer base.
Carl: Before handing it over to Carl I'll summarize with a few closing thoughts.
Carl: Fiscal 2024 was a very profitable year and EPS was at the top end of our guidance led by the success of our acquisitions relentless focus on margin delivery cost controls and continued efficiencies in our successful digital first marketing approach.
Carl: Our shoe carnival comps remain under pressure during non event periods.
Carl: We anticipate that pressure continues this year with a lower income customer uncertainty of tariffs and increased volatility with Hispanic customers.
Carl: Two stations with the fastest growing footwear chain in our industry again, and our re banner in market test exceeded our success criteria.
Carl: We rolled out today, our new strategy to scale up shoes station from a regional to a national footwear leader. The first phase will be complete 24 months with 51% of our current store fleet operated under our station growth banner.
Carl: It is a significant near term investment that pays back quickly and is expected to drive over a 20% increase in profitability at the re banner stores.
Carl: Despite a volatile landscape in the industry, our team strengthened our competitive and financial position during 2024 and achieved our expectations.
Carl: The early 2025 industry landscape is shaping up like 2024, and as such we expect continued mid to high singles declines from the lower income household at our Carnival banner.
Carl: We also have the added unknown of tariffs yet to play out with the customer vendors and industry pricing yet despite the market volatility expected in 2025, we are well positioned with our strong balance sheet to advance our strategies and invest during this down cycle to prepare for long term profit growth in 2027.
Carl: Finally.
Carl: As we announced previously <unk> is retiring April 4th after over 50 years in the retail industry in over a decade of service tissue Carnival. Thank you so much Carl for your outstanding partnership and leadership.
Speaker Change: We also recently announced the Tanya Gordon has been appointed to succeed Carl as our next Chief Merchandising Officer I've worked with Tania for many years and can share she is passionate about brands.
Speaker Change: Growth prioritizes vendor relationships and we will work tirelessly to drive our vision into reality on behalf of the board of directors I would like to congratulate Tanya.
Carl: And now for one last time I'd like to hand, it over to Carl.
Speaker Change: Carl.
Carl: Thank you Mark for full year fiscal 2024, we achieved a net sales increase in line with our expectations and delivered $2 68.
Carl: Earnings per share, which was at the very high end of our guidance.
Carl: The sales trends, we had been experiencing through 2024 continued during the fourth quarter, we performed well during the peak event times of Thanksgiving and Christmas during off peak times, we saw traffic and comp sales declines at our carnival better.
Carl: Very proud of our team as they manage their way through the changes in customer behavior.
Carl: <unk> increased our receipts in January to prepare for the first quarter, we built our stores as well as delivered product early to avoid the effect of potential supply chain disruptions and additional tariffs.
Carl: Ending inventory was flat versus year end 2023, excluding the inventory of Rogen shoes that was acquired during 2024.
Carl: Patrick will take you through the individual product category performances for Q4.
Speaker Change: As I prepare for my retirement next month, I would like to congratulate Chief merchandising officer, and executive Vice President and Tania Gordon on her new role.
Speaker Change: He brings extensive retail experience that position and has played a key role within the shoe Carnival merchant organization for 10 plus years. She has worked closely with Mark and the officer team and as a cultural leader within the company.
Speaker Change: Tommy has established excellent vendor relationships, where our chief Carnival.
Speaker Change: Tribute has greatly to the success of the company.
Speaker Change: I'm very confident I leave to achieving good hands.
Speaker Change: Being part of this industry for many years I've had the pleasure to work with countless individuals I would personally like to thank the vendor community support.
Speaker Change: Year after year.
Speaker Change: Especially thankful for your support for shoe carnival or over the past 12 plus years, we together have achieved much success.
I am most proud to have been part of this great company I would like to thank Mark Gordon Cliff Sifford, and the board of directors for giving me this amazing opportunity.
Speaker Change: Thank you to the management team here at shoe Carnival for their unwavering support as well as our over 6000 employees.
Speaker Change: A special thanks to the shoe Carnival amazing and talented merchant team. It has been my privilege to the part of this team for over 12 years, we have seen a great deal of change and at times unheard of disruptions you have.
Speaker Change: Performed brilliantly through it all you truly are best in class and I know you will achieve great success in the future.
Speaker Change: With that I would like to thank our investors and analysts I have enjoyed working with you over the years I will now turn the call over to Patrick for a review of our financials.
Speaker Change: Hatrick.
Patrick: Carl I would like to thank you for your guidance and leadership.
Patrick: Now moving onto our financial results.
Patrick: We delivered EPS at the high end of our guidance for the quarter at 54 per share on an adjusted basis and 53 per share on a GAAP basis and grew our annual topline and adjusted EPS compared to the prior year.
Patrick: Comparisons between our quarterly and annual results in fiscal 2024 compared to fiscal 2023 were impacted by a one week shift in the retail calendar, which benefited net sales of approximately $20 million in fiscal 2020, Three's 14 week fourth quarter and $15 million in fiscal 2023.
Patrick: <unk> 53 week year.
Patrick: We estimate the retail calendar shift contributed EPS of approximately <unk> <unk> in.
Patrick: In the fourth quarter last year, when we earned GAAP EPS of <unk> 57.
Patrick: And adjusted EPS of <unk> 59.
Patrick: Taking into account the <unk> <unk> headwind, we otherwise grew our fourth quarter results led by our <unk> acquisition inclusive of synergy capture and shoe stations industry leading performance.
Patrick: Now going into more detail starting with net sales.
Patrick: In the fourth quarter net sales totaled $262 9 million consistent with expectations.
Patrick: Compared to $280 2 million last year as noted sales in Q4 2023 benefited from the calendar shift by approximately $20 million. So net sales otherwise increased approximately $2 million.
Patrick: Net sales in the comparable 52 weeks last year were led by growth from shoe station, which outpaced the industry and the Rogen acquisition, adding revenues of $16 5 million.
Patrick: On a comparable store basis, which excludes the impact of the calendar shift rogen sales and other new store growth net sales for fourth quarter declined six 3%, primarily due to shoe carnival sales and non event periods.
Patrick: From a category perspective in the quarter adult athletic sales decreased mid singles, while athletic performance at our shoe station banner delivered a high single increase led by running in court.
Patrick: Children's sales were down low teens, primarily due to softness in boots.
Patrick: Children's Athletic grew that our shoe station stores as we continue to increase children's penetration with our shoe station customer.
Patrick: Fourth quarter sales in womens non athletic footwear were down high singles with boots, the key driver once again.
Patrick: Casual was up high singles and sandals continued to perform well with a low singles increase.
Patrick: Men Athletic comp sales were down low singles dress was down mid teens and boots were down mid singles consistent with womens mens casual was up low singles.
Patrick: On an annual basis net sales in fiscal 2024 totaled 121 3 billion and grew two 3% compared to fiscal 2023 that had an extra week of sales.
Patrick: Without the 50 <unk> week benefiting last year sales were up three 7%.
Patrick: This increase was primarily due to our shoe station growth strategy, which increased sales five 7% compared to the prior year 53 week period, our acquisition of Rogen and growth during event period shopping.
Patrick: Comparable sales were down three 9%.
Patrick: As Mark mentioned, our two 3% sales increase was consistent with expectations and exceeded the competition.
Patrick: Q4 gross profit margin was 34, 9% on a GAAP basis, and 35% on an adjusted basis compared to Q4 2024 gross profit margin of 35, 6%.
Patrick: On a GAAP basis gross profit margin declined 70 basis points the.
Patrick: The decrease was primarily due to <unk> cost, which increased on higher occupancy costs from operating more stores and deleverage as impacted by the retail calendar shift.
Patrick: Our merchandise margins were higher in the quarter by 35 basis points inclusive of higher product margins on boots.
Patrick: For the year gross profit margin was 35, 6% consistent with expectations and exceeded 35% for the fourth consecutive year.
Patrick: Overall gross profit margin was down 20 basis points compared to last year with <unk> down 30 basis points on increased occupancy costs offset by merchandise margin up 10 basis points.
Patrick: SG&A in Q4 was $77 6 million, representing a decrease of $2 1 million versus 2020 Three's fourth quarter.
Patrick: The decrease was primarily related to lower selling cost at shoe Carnival and shoe station stores, given the extra week per store operations in last year's results.
Patrick: This combined with current year expense reductions and optimized advertising spend more than offset new costs associated with <unk> in the quarter.
Patrick: As a percentage of net sales SG&A in the quarter was 29, 6% with deleverage, reflecting the extra week of sales last year offset by the lower expenses.
Patrick: Now going into more detail on rogen.
Patrick: The <unk> acquisition contributed solid results this year with net sales approximating $16 5 million in the quarter and over $80 million for the year as expected.
Patrick: When we purchase Rogen, we guided that it would earn $10 million of operating income and that operating income would increase after synergy capture was complete.
Patrick: In FY 'twenty, four we beat that $10 million original target by over 20% with the primary driver being synergy capture in advance of the original timeline.
Patrick: In the fourth quarter, we recorded $3 million of tax credits and other income associated with <unk> operations.
Patrick: And we recorded a benefit to income taxes related to rogen that favorably impacted our annual effective tax rate by approximately 80 basis points.
Patrick: Our ability to integrate the acquired business ahead of schedule and capture full synergies was a key driver of increased value for shareholders. This year.
Patrick: Fourth quarter 2024, net income was $14 7 million or <unk> 53 per diluted share compared to fourth quarter 2023, net income of $15 5 million or <unk> 57 per diluted share.
Patrick: On an adjusted basis, excluding merger and integration expenses fourth quarter 2024, adjusted EPS was <unk> 54.
Patrick: Compared to <unk> 59 in fourth quarter 2023.
Patrick: As previously noted we estimate the retail calendar shift benefited fourth quarter 2023 by approximately 10.
Patrick: For the full year net income in fiscal 2024 grew $73 8 million or $2 68 per diluted share compared to net income of $73 3 million or $2 68 per diluted share in fiscal 2023.
Patrick: Adjusted net income in fiscal 2024 grew to $75 million or $2 72 per diluted share compared to $74 million or $2 70 per diluted share in fiscal 2023 or.
Patrick: Our growth strategies led by Schuh station and rogen more than offset the impact of sales at our shoe Carnival banner declining mid singles for the year.
Patrick: And the extra week last year.
Patrick: Our income tax rate in fiscal 2024 was 24, 3%, resulting in a headwind to EPS of approximately <unk> <unk> per share versus the prior year rate of 23, 7%.
Patrick: This higher rate, primarily reflected discrete benefits that favorably impacted the prior year that did not recur in fiscal 2024, and a lower benefit from share based awards in fiscal 2024 offset by the Romans benefits previously discussed.
Patrick: Merchandise inventories totaled $385 6 million at the end of fiscal 2024, an increase of $39 2 million compared to the end of fiscal 2023, primarily reflecting rogen acquired inventory.
Patrick: Merchandise inventory supporting shoe Carnival and shoe station stores were slightly down on a unit basis at the end of fiscal 2024 compared to the end of fiscal 2023.
Patrick: Additional inventory purchases were made near year end to support re banner additional stores and to a lesser extent as a hedge against potential supply chain disruption from port worker strides and from tariffs.
Patrick: Fiscal 2024, Mark the 20th consecutive year. The company ended the year with no debt at.
Patrick: At the end of the year, we had total cash cash equivalents in marketable securities of approximately $123 million, an increase of $12 million versus last year, including the all cash acquisition of <unk> earlier in fiscal 2024.
Patrick: Cash flow from operations in fiscal 2024 was over $100 million and capital expenditures were down $23 million, bringing up cash for increased dividends and further investment and growth strategies in fiscal 2025.
Patrick: To further support shareholder value last week, we increased our dividend by 11% to <unk> 15 per share representing an increased annualized dividend rate of <unk> 60 per share.
Patrick: This new rate is a 238% increase compared to five years ago.
Patrick: We have now provided a dividend for 52 consecutive quarters and increased our dividend for 11 straight years.
Patrick: Including newly re banner stores at the end of fiscal 2024, we operated 430 stores with 360 shoe Carnival stores 42 shoe station stores and the 28 rogen locations.
Patrick: Before discussing our outlook for 2025, I'm going to build on Mark's comments regarding our re banner growth strategy industry data supports shoe station has the fastest growing retailer in our industry and we aim to capitalize on that.
Patrick: From our 10 store and market test in aggregate, we are seeing positive results with over a 10% top line lift and a more than 10% increase in store profitability.
Patrick: As Mark mentioned, we're going to re banner $50 to 75 stores in fiscal 2025, and 24 months over half of our present store fleet is expected to operate as a shoe station store.
Mark Worden: Over the long term, we see significant benefits of re banner stores to shoe station stores.
Mark Worden: During fiscal 2025, we anticipate spending between $35 $45 million in capital expenditures for store growth, including re banner in the 50 to 75 stores.
Mark Worden: We forecast a $20 million to $25 million investment impacting the P&L.
Mark Worden: These P&L impacts include amortization of the Capex investments.
Mark Worden: Other new store opening costs and customer acquisition costs.
Mark Worden: Sales reductions during the four to six week period, while the shoe Carnival stores closed and the shoe station stores Grand opened and write offs of existing assets.
Mark Worden: We expect this 20% to 25 million P&L investment to decrease our operating income in fiscal 2025 compared to fiscal 2024 in a range around 65 per share.
Mark Worden: Our modeling and end market test support a rapid payback for the re banner stores.
Mark Worden: We expect this first year P&L investment will be recovered over a two to three year period following the stores Grand opening.
Mark Worden: In 2027, we expect that net sales from these re banner stores will be over 10% higher and profit contribution will increase over 20% compared to the stores before being re bantered.
Mark Worden: In fiscal 2026, our plan is to scale up further and complete 100 or more re banners with the first year P&L investment forecast between $22 million and $27 million and a similar path to payback for the investment of approximately two to three years.
Mark Worden: As we progress towards 51% of the present store fleet operating at the shoe station store increased store profitability from the stores re bantered in fiscal 2025 is expected to largely offset the P&L investment in fiscal 2026.
Mark Worden: Moving on to our 2025 outlook.
Mark Worden: Our financial outlook in fiscal 2025 contains a wider range reflective of anticipated volatility and uncertainty surrounding tariffs inflation and geopolitical topics and the impacts these uncertainties might have on consumer confidence and spending for family footwear.
Mark Worden: This guidance is also impacted by variability of when each of the anticipated 50 to 75 <unk> stores will Grand open.
Mark Worden: Net sales are expected to be in a range of one 5 billion to 123 billion, representing a range of down 4% to up 2%.
Mark Worden: For fiscal 2025, GAAP EPS is expected to be in a range of $1 60 to $2 10.
Mark Worden: Total capital expenditures are expected to be in a range of 45 million to $60 million with $35 million to $45 million targeted for re banners and other store growth compared to Capex recorded in FY 'twenty two to FY 'twenty for the totaled 76 million $56 million and 33.
Mark Worden: <unk> million respectively.
Mark Worden: For a little more color on our 2025 outlook compared.
Mark Worden: Compared to GAAP EPS of $2 68 earned in fiscal 2024 to 65 re banner P&L investment in the Rogen tax benefits in FY 'twenty four are the primary drivers to the $1 85 midpoint of our EPS guidance.
Mark Worden: Similarly, the midpoint of our net sales guidance of down approximately 1% is reflective of the downtime associated with re banners as stores are closed and reopened.
Mark Worden: During FY 'twenty five we anticipate minimal change to our store count with one to three stores opening in two to four stores closing.
Mark Worden: Our sales and EPS guidance contemplate modest price increases, including from tariffs <unk> inflation inconsistency in consumer confidence.
Mark Worden: As a result of the changes taking place in FY 'twenty five we are providing additional information on the first quarter.
Mark Worden: We do not expect first quarter comparable store sales trends to improve versus Q4 2024 is non event period buying resembles last year trend so far.
Mark Worden: We also expect a headwind to sales of approximately 1% associated with our re banner strategy.
Mark Worden: With respect to EPS in Q1, 2025 to 65 annual re banner investment is expected to be generally ratable between the first half and back half of the year and between 15 and 20 per quarter.
Mark Worden: Before opening up for questions I will summarize a few closing thoughts.
Mark Worden: In fiscal 2024, we grew our net sales and adjusted EPS with adjusted EPS at the high end of our guidance range exceeding the competition.
Mark Worden: We closed out FY 2024.
Mark Worden: With strong cash generation and our recent acquisition delivered operating income, 20% greater than expectations on full synergy capture.
Mark Worden: In FY 'twenty five we're going to re banner 50 to 75 stores and expect that associated P&L investment will be paid back in two to three years into materially fund continued investment in FY 2026.
Mark Worden: Our water view of guidance for FY 'twenty five reflects impacts from our re banner strategy at the midpoint and assumes customer behavior and non event periods resembles similar down trends last year.
Mark Worden: Today, we announced that April 24, 2025 has been set as the shareholder of record date for our annual meeting and the annual meeting of shareholders will be held on June 25 2025.
Mark Worden: This concludes our comments I will now open up the call for questions operator.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad to Asia had joined the queue. If you would like to retire question simply press Star one again.
Speaker Change: I called up on to ask a question in our listening via loud speakers on your device. Please pickup your handset and I'm sure that your phone is not on mute when asking a question yes.
Mitch: Your first question comes from Mitch <unk> with Seaport Research. Please go ahead.
Mitch: Yes, thanks for taking my questions and Karl I'd like to wish you all the best in retirement.
Mark Worden: Mark Let me, let me start on the re bantering.
Mark Worden: So the 10 store test if I understand it correctly was all end market.
With 50% to 75 stores that you guys are doing.
Mark Worden: 2025.
Speaker Change: Are those also all in market or some of them out of market and I mean, it sounds like over time.
Speaker Change: Some of these rebranded stores youre going to be out of market. What gives you the confidence that this is going to work as well.
Speaker Change: Auto market.
Speaker Change: Where you really haven't I guess tested so far.
Speaker Change: Other questions.
Speaker Change: Good morning, Mitch. Thank you for the question.
Speaker Change: We're very excited about the strategy we've been mining this data for a few years now and it gives us great confidence that the higher income.
Speaker Change: Non urban customer resonates with the shoes station banner premium assortment the excellent service the technical expertise we provide in this modern shopping experience youre spot on on the question. The 10 source test suite all within existing markets.
Speaker Change: And they performed very well again to recap sales in aggregate grew over 10% better than shoe carnival during that period of time.
Speaker Change: Profits double digit with great growth and margin customers in the higher income bracket and every core metrics as we March forward. This first tranche.
Speaker Change: Is focused on filling in gaps largely in the markets.
Speaker Change: Right now we have multiple of these 50 to 75 stores rolling out already.
Speaker Change: In existing markets, where our shoes station is already known and then the plan is to expand into new markets that are not covered within existing states. So for example in the state of Florida, we have multiple rebounders stores going on right. This minute, where we had underperforming shoe carnival.
Speaker Change: <unk> stores the demographics look.
Speaker Change: Far superior to be matching issue station.
Speaker Change: In the process of rebound entering those now so that'd be an example of the expansion strategy in a state where the brand is known but markets for Carnival is underperforming.
Speaker Change: As the year progresses, we will be broadening that to go where the demographics and data looks like it should work and will be methodically and slowly later the year expanding into new states confirming that we have the strength of results that we've seen so far.
Speaker Change: So it really <unk> 26 that we see branching off into areas that are meaningfully different for shoes station and Thats, where were going to be getting a lot of data and testing. This year. So we're very confident when we do get into those newer markets further out of.
Speaker Change: SEC, South ACC kind of territories with March madness on my mind, as well kind of that world will kind of branch out into big 10, and big East country as we get into further years.
Speaker Change: Alright, Thats helpful. Mark and then on the on the tariffs.
Speaker Change: I think Patrick prepared remarks. It was mentioned that you guys are to the guidance assuming some modest.
Speaker Change: Nice increases I was just hoping you could provide a little bit more color in terms of what youre seeing.
Speaker Change: With the vendors that you work with in terms of what Theyre doing on pricing and then on the on the private label side.
Speaker Change: What are you seeing in terms of kind of costing there or any sort of color would be helpful.
Carl: Sure Matt It's Carl.
Carl: At this point.
Carl: <unk> settled right now we're getting.
Carl: Information from vendor to vendor that that is different.
Carl: In most cases the vendors are.
Carl: We are able to.
Carl: I assume some of those cost negotiated with the factories.
Carl: We're not seeing across the board.
Carl: Rice increases for fall based on tariffs, but we might be seeing some price increases on individual items.
Carl: Newness new items, but so far things have held with the big core items.
Carl: We're seeing some price increases potentially in the mid single digits at the high.
Carl: And certainly we believe we will be able to.
Carl: Tolerate those pass those along where we can.
Carl: So we've not seen anything meaningful today again, the vendors are all over the board as they are continue to negotiate with factories and transportation and.
Carl: And agents so it's it.
Carl: It is unsettled right now.
Carl: But we don't we see some effect, but not not the 20% that you hear about.
Carl: Coming out of China right now.
Mark Worden: And if I could build on it as Mark and that's what our guide assumes continues.
Speaker Change: As Carl laid out what we're seeing today.
Speaker Change: If we see a volatile swing with double digit changes pass through from Vietnam in particular or major China implications that is not implicit in our guidance. We provided today and we would revisit that if that changes, but as Carl said, we have not experienced that sharp.
Speaker Change: Implications of yet.
Speaker Change: And then I guess, maybe as the last question just on the guide so for the full year you are giving us.
Speaker Change: Sales in GAAP earnings.
Speaker Change: Is there any more you can say in terms of kind of what comp outlook is embedded in that as well as.
Speaker Change: Our margins breakout kind of any thoughts around gross margin op margin.
Speaker Change: On the first quarter.
Speaker Change: Is there sort of an EPS range that youre looking at in the first quarter and I wasn't real clear what the.
Speaker Change: Rebranding impact re banner impact.
Speaker Change: Q1 is that I think you said something like 15 to 20, maybe just some more clarity there.
Speaker Change: I mentioned, Patrick nice to talk to you.
Speaker Change: With respect to the first part on comp we expect.
Speaker Change: <unk> minimal store openings and closings next year. So the guide that we provided of two to down four would be the same for both total sales and comp.
Okay.
Speaker Change: On gross profit margin.
Speaker Change: Our expectation is we both mark and I touted.
Speaker Change: Fourth year above 35% our expectation for next year based on where we sit today and as Karl mentioned and Mark mentioned with respect to the.
Speaker Change: The impact of tariffs on things that we think are happening in our guide we think that above 35% is going to stick for next year.
Speaker Change: Okay.
Speaker Change: There's obviously a lot of play in that number given the uncertainty and unsettling in the market right now.
Speaker Change: On Q1.
Speaker Change: Okay.
Speaker Change: On Q1, we're going to reiterate what we said before which is what we've seen so far today on sales.
Speaker Change: Which is that they're down in non event periods much like they were in Q4 last year.
Speaker Change: And that we expect it to be a little bit worse than that because of the re banner strategy. So.
Speaker Change: Well, our sales forecast would be on would be outside of our guidance range for Q1, if you take both of those things into account.
Speaker Change: And then with respect to the.
Speaker Change: Re banner strategy. The 65 is obviously a range it's not an exact number we would love to be that good but we are obviously not that good with the number of stores and the guide for that is going to stick with the 15% to 20 impact for for Q1, but they are duplicative the non <unk>.
Speaker Change: That sort of thing that we've seen thus far then mark talked about and then the 15% to 20 on the re banner strategy.
Speaker Change: Okay.
Speaker Change: Alright, Thanks, and good luck.
Speaker Change: Your next question comes from Sam Poser with Williams trading. Please go ahead.
Thank you.
Speaker Change: Save the best question for last but.
Speaker Change: Doug.
Speaker Change: Yes.
I wanted to just follow up on niches question regarding how many stores are you can you sort of give us the breakdown of how many stores you rebid.
Speaker Change: Bantering.
Speaker Change: By quarter or something can you just say okay of these 50 to 75.
Speaker Change: X percent will be at what time by one quarter.
Speaker Change: But within which quarters I know some will overlap quarters, but.
Speaker Change: Hi, Sam Good morning, it's Mark Thanks for the question, who would planet half the guide range before back to school and have their guide range after back to school.
Speaker Change: <unk>.
Speaker Change: The simplest way to say that.
Speaker Change: So so so with the majority.
Speaker Change: That in and you wouldnt be doing it during holiday so could we assume.
Speaker Change: And you want to be ready for back to school could we assume that Q1 and Q3 would be the most.
Speaker Change: Sorry.
Speaker Change: One and the end of Q3 into the beginning of Q4 be the most impacted periods of time from this is that the right way to think about it.
Speaker Change: It's not wrong.
Speaker Change: The back half is still not 100% firm, but youre, absolutely right thinking about will be doing the work and downtime and non event periods as the approach for the most part we don't want to impact customer and shopping behavior during bts or holiday periods are spot on with that.
Speaker Change: Going right now with again, we don't have the exact point that we're guiding but it wouldnt be wrong to think we got in that 35 to 40 ish of the stores before back to school gets going that'd be a nice ambition of us if everything goes smooth with construction and product and materials. So that wouldnt be wrong to think about it that way and then we'll pick back up after <unk>.
Speaker Change: Back to school with the maximum amount, we can accomplish without distracting.
Speaker Change: The holiday period in sync with the great product.
Speaker Change: In stores and construction flawless. So you could see some go into January if we feel it's too late to not impact GIC and holiday, but the way you described it is right overall.
Speaker Change: So then so then like.
Speaker Change: Your.
Speaker Change: Your comps from just theoretically your comps in during the back to school season, which arguably is the end of Q2 into.
Bruce: Bruce early September.
Bruce: And then all of the comps.
Bruce: That period and the timing of all of this should be the best comp periods of the year for both the event periods situations and.
Bruce: These stores will be open and growing and theoretically performing.
Bruce: At a better rate than they did before yeah.
Bruce: You are absolutely spot on by holiday, we will have between 22 and 27% of the company under the station banner compared to nine something as we started the year. So you're absolutely right is that percent starts to become a meaningful scale it'll start offsetting.
Bruce: We anticipate mid to high single declines in Carnival, and while we're moving as fast as possible because as we said we had comp growth in station last year, and we're very pleased with where it's gone so bang on.
Bruce: By back to school will be our strongest period of growth. We expect awful stations still have the scale to demonstrably move the needle.
Bruce: As we flip forward to back to school 2006, now we're starting to get to a point, where we believe.
Bruce: Theres enough scale, we're getting very close to 51% with each quarter and Thats, where we believe we can start seeing positive trends certainly as we get to holiday 2006 and into 'twenty, seven, but youre spot on it should get better with each passing quarter as we get towards holiday of this year the event periods.
Bruce: <unk>.
Bruce: And within back to school.
Bruce: What percent of back to school selling jet.
Bruce: General.
Bruce: Happens in Q2 versus Q3.
Bruce: Great.
Bruce: It's about half a rough estimate.
Bruce: And then lastly.
Bruce: This is for this is for Carl.
Speaker Change: I'm going to Miss Chicago.
Bruce: But I've got to ask you and I'm going to follow up on the same question for Mark.
Speaker Change: Who do you think is.
Bruce: Better.
Bruce: The.
Bruce: The current <unk>.
Bruce: Merchandising officer, or the incoming merchandise chief merchandising officer.
Sam Poser: Well Sam.
Bruce: I'll put it this way.
Speaker Change: Since the incoming chief merchandising officer with somebody I recruited 11 years ago.
Speaker Change: And have been working with closely all of that time I believe there is potential for for growth in the future.
Speaker Change: So that's not an <unk>.
Speaker Change: Have a conversation with tiny because thats not an overwhelming theres potential.
Speaker Change: I mean, it's.
Speaker Change: No.
Speaker Change: Alright, well and then Mark So let me question Sam.
Speaker Change: Tim Let me say this we are I'm very excited to turn the reins over to Tania.
Speaker Change: And we've worked very very closely.
Speaker Change: In the future and I think she is going to do a terrific job.
Speaker Change: And the team here.
Speaker Change: Really as excited and support her 100%.
Speaker Change: Well what I.
Speaker Change: I thought she had more support to new but I.
Speaker Change: Now I'm not really sure.
Mark Worden: And Mark and Mark I ask you the second question.
Sam Poser: The question, Sam because I've been so fortunate I've had the best chief merchant in the industry.
Mark Worden: And so fortunate to work with Karl and like you I'm going to Miss him.
Mark Worden: On April six I have the next best Chief merchant in the industry and I think the vendor community is talking to so many people is so supportive of.
Speaker Change: Where we've been where Congress is going to take a Tanya is the absolute right person to bring business next vision to life as we transform the corporation, Tom who is going to be very aggressive about growth. She is going to be aggressive about building our relationship from taken it from strength to strength, but a new thing as we go after higher income customers with half of the corporate.
Speaker Change: Or more and go after getting the best brands premium prices Tanya is going to be we've got great confidence in her and so does our vendor community. So I've been fortunate to great Chief merchants, one retiring after 50 years and one just about the start.
Speaker Change: Okay.
Speaker Change: Alright, I'm going to throw one more in for.
Speaker Change: Patrick.
Speaker Change: Again follow up to that.
Speaker Change: Mitch just question on the gross margin.
Speaker Change: How do we think about the gross margin.
Speaker Change: From the <unk> and the.
Speaker Change: Merge because I mean, I assume that Q1's gross margin is going to be down quite a bit.
Speaker Change: Reflective of Q4 again because of.
Speaker Change: Because of the.
Speaker Change: Mostly because of the <unk> is that.
Speaker Change: Is that the right way to think about it.
Sam Poser: Sam with respect to our overall concept on just talking about the year and the full guide on.
Speaker Change: On margins.
Speaker Change: At the mid point, we would expect some deleverage because our sales are expected down there is a commitment.
Speaker Change: In our in our process for what we see right now assuming that everything holds holds on tariffs and on consumer confidence and on the general basis of market conditions right now that we would expect.
Speaker Change: A margin above 35% for the whole year with some deleverage on on the BD <unk> and some stability in our merchandise margins.
Speaker Change: And in the quarter the expectation would be the same but there would be a little bit more deleverage because the sales are planned down a little bit more.
Speaker Change: And that would also be true at the end of Q3 going into Q4 because of the store.
Speaker Change: Because of the store re dos, but offset by the new store open you'd get offset you'd get offset by the by the new stores.
Sam Poser: The stores that were converted earlier in the year, which don't get right. Now is that correct that is that is a fair assessment Sam.
Speaker Change: Okay, well, thanks, very much and good luck.
Speaker Change: Thank you. Thank you Sam.
Mark Gordon: There are no more questions I will now turn the conference back over to Mark Gordon for closing remarks.
Mark Gordon: Thank you all so much for joining us today 2024, if it was a tough year in the market, but I want to thank our vendors our team for achieving growth and sales growth and profits.
Mark Gordon: Bullet proof balance sheet, where we started the year with no debt ended the year with no debt and I really like where we start 2025.
Mark Gordon: Volatile without a doubt as we've talked through but we have a strategic plan here to rapidly move from under 10% of our company with our growth banner, so over half of our company.
Mark Gordon: Marketed and engaging with our customers with our growth banner in just 24 months the.
Mark Gordon: Profit accretion that comes from this investment and the payback are fast Theyre high and we've got a great enthusiasm from the vendor community to help us continue to bring the most distinct family footwear brand to the market. So thank you so much and I really look forward to talking to you all again in Q1 about <unk>.
Mark Gordon: Early insights from the rollout and how we're progressing.
Mark Gordon: Best wishes to talk to you soon.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.