Shoe Carnival's Q2 Sales, Profit Slip Amid Macro Headwinds

TL;DR

**SCVL's latest 10-Q shows a clear slowdown, with sales and profit dropping significantly – time to be cautious.**

AI Summary

Shoe Carnival, Inc. (SCVL) reported a decline in net sales and net income for both the thirteen and twenty-six weeks ended August 2, 2025, compared to the prior year. For the thirteen weeks, net sales decreased by 7.9% to $306.388 million from $332.696 million, and net income fell by 14.9% to $19.225 million from $22.573 million. Over the twenty-six weeks, net sales dropped by 7.7% to $584.103 million from $633.061 million, and net income decreased by 28.3% to $28.568 million from $39.859 million. Operating income also saw a significant reduction, falling from $52.586 million to $37.193 million for the twenty-six-week period. Merchandise inventories increased to $449.005 million as of August 2, 2025, from $385.605 million at February 1, 2025. The company recognized an increase in deferred tax expense due to the One Big Beautiful Bill Act (OBBB) signed on July 4, 2025, which made 100% bonus depreciation and domestic research cost expensing permanent. Despite the decline in profitability, total assets increased to $1.165 billion from $1.124 billion, and shareholders' equity grew to $670.690 million from $648.996 million.

Why It Matters

Shoe Carnival's declining sales and net income signal a challenging retail environment, impacting investor confidence and potentially future dividend growth. The increase in merchandise inventories to $449.005 million could indicate slowing consumer demand or overstocking, which might lead to future markdowns and pressure on margins. For employees, sustained declines could lead to operational adjustments, while customers might see more promotional activity. In the competitive footwear market, this performance could allow rivals like Foot Locker or DSW to gain market share, especially if Shoe Carnival struggles to adapt to changing consumer preferences or economic pressures.

Risk Assessment

Risk Level: medium — The company experienced a 7.9% decrease in net sales and a 14.9% decrease in net income for the thirteen weeks ended August 2, 2025, compared to the prior year. Additionally, merchandise inventories increased by $63.400 million in the twenty-six weeks ended August 2, 2025, indicating potential overstocking and future markdown risk, which could further pressure gross profit margins.

Analyst Insight

Investors should closely monitor SCVL's inventory levels and future sales trends for signs of stabilization. Consider holding off on new investments until there's clear evidence of a turnaround in sales and profitability, or a strategic plan to address the inventory build-up is articulated.

Financial Highlights

debt To Equity

0.74

revenue

$584.103M

operating Margin

6.37%

total Assets

$1.165B

total Debt

$394.531M

net Income

$28.568M

eps

$1.04

gross Margin

36.74%

cash Position

$78.719M

revenue Growth

-7.7%

Key Numbers

• $306.388M — Net Sales (Decreased 7.9% for the thirteen weeks ended August 2, 2025, from $332.696M in the prior year.)
• $19.225M — Net Income (Decreased 14.9% for the thirteen weeks ended August 2, 2025, from $22.573M in the prior year.)
• $584.103M — Net Sales (Decreased 7.7% for the twenty-six weeks ended August 2, 2025, from $633.061M in the prior year.)
• $28.568M — Net Income (Decreased 28.3% for the twenty-six weeks ended August 2, 2025, from $39.859M in the prior year.)
• $449.005M — Merchandise Inventories (Increased from $385.605M at February 1, 2025, indicating potential overstocking.)
• $0.70 — Diluted EPS (Decreased from $0.82 for the thirteen weeks ended August 3, 2024.)
• $1.04 — Diluted EPS (Decreased from $1.45 for the twenty-six weeks ended August 3, 2024.)
• $3,622 — Net cash provided by operating activities (Significantly decreased from $40,742 for the twenty-six weeks ended August 3, 2024.)
• $24,408 — Purchases of property and equipment (Increased from $15,722 for the twenty-six weeks ended August 3, 2024.)
• 27,372,822 — Shares Outstanding (As of August 27, 2025.)

Key Players & Entities

• Shoe Carnival, Inc. (company) — registrant
• Rogan Shoes, Incorporated (company) — acquired subsidiary
• President Trump (person) — signed the OBBB into law
• The Nasdaq Stock Market LLC (regulator) — exchange where SCVL is registered
• $306.388 million (dollar_amount) — net sales for thirteen weeks ended August 2, 2025
• $19.225 million (dollar_amount) — net income for thirteen weeks ended August 2, 2025
• $449.005 million (dollar_amount) — merchandise inventories as of August 2, 2025
• $44.8 million (dollar_amount) — purchase price for Rogan Shoes acquisition
• One Big Beautiful Bill Act (regulator) — new tax legislation affecting deferred tax expense
• Bloomberg (company) — publisher

FAQ

Risk Factors

• Dependence on Consumer Spending [high — market]: The company's net sales have declined by 7.9% for the thirteen weeks and 7.7% for the twenty-six weeks ended August 2, 2025. This indicates a sensitivity to consumer discretionary spending, which can be impacted by economic conditions.
• Inventory Management [medium — operational]: Merchandise inventories increased to $449.005 million as of August 2, 2025, from $385.605 million at February 1, 2025. This significant increase, coupled with declining sales, suggests a potential risk of overstocking and associated carrying costs or markdowns.
• Decreasing Profitability [high — financial]: Net income decreased by 14.9% for the thirteen weeks and 28.3% for the twenty-six weeks ended August 2, 2025. Operating income also fell from $52.586 million to $37.193 million for the twenty-six-week period, indicating pressure on margins and overall profitability.
• Tax Law Changes [medium — regulatory]: The company recognized an increase in deferred tax expense due to the 'One Big Beautiful Bill Act' (OBBB) making 100% bonus depreciation and domestic research cost expensing permanent. While this may offer future benefits, the immediate impact on tax expense needs careful management.

Industry Context

The athletic footwear and apparel industry is highly competitive, with major players and a constant need for trend adaptation. Recent trends show a continued demand for athleisure wear and performance-focused products. However, economic headwinds and shifts in consumer spending patterns can significantly impact sales for retailers like Shoe Carnival, which relies on discretionary purchases.

Regulatory Implications

The 'One Big Beautiful Bill Act' (OBBB) has introduced permanent changes to bonus depreciation and research cost expensing. While this may offer long-term tax advantages, the immediate recognition of increased deferred tax expense requires careful financial planning and reporting. Companies must stay abreast of evolving tax regulations and their financial implications.

What Investors Should Do

1. Monitor inventory levels and turnover ratios.
2. Analyze the drivers of declining sales and profitability.
3. Evaluate the impact of tax law changes on future earnings.
4. Assess the company's ability to manage operating expenses.

Key Dates

• 2025-08-02: End of the second quarter for the 10-Q filing. — Provides the latest financial performance data, showing declining sales and net income compared to the prior year.
• 2025-07-04: Signing of the 'One Big Beautiful Bill Act' (OBBB). — Introduced changes to tax depreciation and research cost expensing, impacting the company's deferred tax expense.
• 2025-02-01: End of the previous fiscal year. — Serves as a baseline for inventory comparison, showing an increase in merchandise inventories from this date.
• 2024-08-03: Prior year comparable period end date. — Used for year-over-year comparisons of sales, net income, and EPS, highlighting the current period's performance decline.

Glossary

Merchandise inventories

The cost of goods that a retailer has on hand and intends to sell. (An increase in merchandise inventories to $449.005 million, especially with declining sales, can signal potential issues with inventory management, leading to increased holding costs or future markdowns.)

Operating lease right-of-use assets

An asset recognized by a lessee for the right to use an underlying asset for the lease term. (These represent a significant portion of the company's assets ($338.950 million), reflecting the lease obligations for its retail store footprint.)

Deferred income taxes

The difference between income tax expense and income tax payable, arising from temporary differences between accounting income and taxable income. (An increase in deferred income taxes to $23.295 million was noted, partly due to recent tax legislation changes.)

Retained earnings

The cumulative amount of net income that a company has retained over time, rather than distributing to shareholders as dividends. (Retained earnings increased to $793.517 million, indicating the company has been profitable over time, though current period net income is down.)

Year-Over-Year Comparison

Compared to the prior year, Shoe Carnival, Inc. has experienced a notable decline in financial performance. For the twenty-six weeks ended August 2, 2025, net sales decreased by 7.7% to $584.103 million, and net income saw a steeper drop of 28.3% to $28.568 million. This is accompanied by a significant reduction in operating income from $52.586 million to $37.193 million. While total assets and shareholders' equity have seen modest increases, the rise in merchandise inventories to $449.005 million, coupled with declining sales, presents a key area of concern.

Key Financial Figures

• $0.01 — ch registered Common Stock, par value $0.01 per share SCVL The Nasdaq Stock Mar

Filing Documents

• scvl-20250802.htm (10-Q) — 2296KB
• scvl-ex10_1.htm (EX-10.1) — 35KB
• scvl-ex31_1.htm (EX-31.1) — 14KB
• scvl-ex31_2.htm (EX-31.2) — 14KB
• scvl-ex32_1.htm (EX-32.1) — 8KB
• scvl-ex32_2.htm (EX-32.2) — 8KB
• 0001193125-25-197220.txt ( ) — 8815KB
• scvl-20250802.xsd (EX-101.SCH) — 773KB
• scvl-20250802_htm.xml (XML) — 2044KB

Financial Statements (Unaudited)

Financial Statements (Unaudited) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Shareholders' Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 24 Item 4.

Controls and Procedures

Controls and Procedures 24 Part II Other Information Item 1A.

Risk Factors

Risk Factors 25 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25 Item 5. Other Information 25 Item 6. Exhibits 25 Signature 26 2 SHOE CARNIVAL, INC.

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS SHOE CARNIVAL, INC. CONDENSED CONSOLID ATED BALANCE SHEETS Unaudited (In thousands, except share data) August 2, 2025 February 1, 2025 August 3, 2024 Assets Current Assets: Cash and cash equivalents $ 78,719 $ 108,680 $ 71,633 Marketable securities 13,198 14,432 12,831 Accounts receivable 8,457 9,018 5,519 Merchandise inventories 449,005 385,605 425,462 Other 24,689 18,409 21,651 Total Current Assets 574,068 536,144 537,096 Property and equipment – net 181,324 172,806 170,717 Operating lease right-of-use assets 338,950 343,547 337,926 Intangible assets 40,945 40,968 40,990 Goodwill 18,018 18,018 15,376 Other noncurrent assets 11,948 12,650 12,922 Total Assets $ 1,165,253 $ 1,124,133 $ 1,115,027 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 68,662 $ 52,030 $ 73,916 Accrued and other liabilities 29,912 25,382 30,204 Current portion of operating lease liabilities 57,889 53,013 55,870 Total Current Liabilities 156,463 130,425 159,990 Long-term portion of operating lease liabilities 303,689 314,974 304,578 Deferred income taxes 23,295 18,879 15,187 Deferred compensation 10,243 10,011 12,564 Other 873 848 4,213 Total Liabilities 494,563 475,137 496,532 Shareholders' Equity: Common stock, $ 0.01 par value, 50,000,000 shares authorized and 41,049,190 shares issued in each period, respectively 410 410 410 Additional paid-in capital 89,462 90,371 86,208 Retained earnings 793,517 773,353 746,996 Treasury stock, at cost, 13,676,368 shares, 13,874,787 shares and 13,875,495 shares, respectively ( 212,699 ) ( 215,138 ) ( 215,119 ) Total Shareholders' Equity 670,690 648,996 618,495 Total Liabilities and Shareholders' Equity $ 1,165,253 $ 1,124,133 $ 1,115,0

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View this 10-Q filing on SEC EDGAR