Shoe Carnival (SCVL) is a high volume, value-oriented retailer of family footwear. The company provides various dress, casual, and athletic footwear products for men, women, and children; and accessories, including socks, belts, shoe care items, handbags, jewelry, scarves, and wallets.The stock is the Bear of the Day after it recently became a Zacks Rank #5 (Strong Sell) because of a poor earnings report last week.
Shoe Carnival has a market cap of $500 million with a forward PE of 18. The company was founded in Evansville, Indiana in 1978 and has 412 stores as of August 31st 2016. The stock sports a Zacks Style Score of “A” in value, but “D” in Growth.
The low growth is the problem for the stock price and after the recent EPS report that took the stock down 15%, investors are starting to run away. It doesn’t help that the company sits in an industry ranked 198 out of 265 (Bottom 25%) of the Zacks Industry Rank.
Q3 Earnings
The company reported Q3 earnings on November 28th, with EPS coming inline. However, revenue came in a little weak as the company missed by $1.5 million. The real issue was the guidance to fiscal year 2016. The company slashed expectations and now sees $1.46-$1.51 versus the expected $1.59.
November same store sales were down 3.3% and gross margin fell to 29.9% form 30.1% year over year. Same store sales was a big disappointment, forcing the company to guide Q4 down to -1% versus the +1% expected.
CEO Clifton E. Sifford had some comments on the quarter:
“Our third quarter operating results were below our expectations due to slower sales of seasonal merchandise in the second half of the quarter… We generated a comparable store sales increase in athletic merchandise in each month of the quarter, although this was offset by a high-single digit comparable store sales decline in our boot categories…. The slow sales of boots and other seasonal merchandise continued through November. While we achieved high-single digit comparable store sales increases in our athletic categories in November, the decline in sales of boots and other seasonal merchandise resulted in a comparable store sales decline of 3.3% for November. We now expect our fourth quarter comparable stores sales to range from a decrease of 1% to an increase of 1%. We will accelerate our promotional activity on seasonal merchandise with the goal of driving sales and ending the season with inventories in-line with our plan.”
Stock Reaction
The stock was trading over $30 a share, but earnings sent it down to $26, right where the 200-day moving average resides. There has been a bounce since, but investors need to be cautious with the 200-day. If it fails, expect lower prices.
Estimates Revisions
Shoe Carnival has seen estimates fall over the last week, a sign that analysts expect last quarter’s issues to continue. For the current year estimates have fallen 16.5% from $1.48 to $1.27. For fiscal year 2017, estimates have been taken down 13.5% to $1.70 from $1.93.
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