Shoe Carnival Inc. (SCVL, Financial) filed Quarterly Report for the period ended 2010-05-01.
Shoe Carnival Inc. has a market cap of $282.1 million; its shares were traded at around $21.42 with a P/E ratio of 13.5 and P/S ratio of 0.4. SCVL is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Jim Simons of Renaissance Technologies LLC.
Net sales increased $22.2 million to $189.5 million during the first quarter of fiscal 2010, a 13.3% increase over the prior year's net sales of $167.3 million. Comparable store sales increased a record 13.1%, or approximately $21.0 million, compared to the prior year period. The three stores opened in the first quarter of fiscal 2010 along with the effect of a full quarter's worth of sales from the 16 stores opened in fiscal 2009 contributed an additional $4.9 million in sales. These sales increases were partially offset by the $3.7 million of sales lost from the stores which were closed since the beginning of fiscal 2009.
Selling, general and administrative expenses increased $4.2 million in the first quarter of fiscal 2010 to $44.3 million; however, our sales gain enabled us to leverage these costs by 0.6% as a percentage of sales. Expense associated with incentive compensation increased $3.6 million during the first quarter of fiscal 2010, as compared to the prior year period, due to our improved financial performance. Also during the first quarter of fiscal 2010, we recorded a non-cash asset impairment of $1.1 million related to certain underperforming stores. These increases were partially offset by a $915,000 decrease in our self-insured health care costs as compared to the first quarter of fiscal 2009 when we experienced unusually high claim activity. The costs related to our self-insured health care programs are subject to a certain degree of volatility and can vary materially between reporting periods.
We expended $3.3 million in cash during the first quarter of fiscal 2010 for the purchase of property and equipment, of which $1.2 million was for new stores, remodeling and store relocation activities. Additional capital expenditures of approximately $10 million to $11 million are expected to be made over the remainder of fiscal 2010. Included in this range of expenditure, is an additional seven stores at a projected cost of approximately $2.5 million and up to $4.6 million of store remodeling and relocation costs. Additional lease incentives to be received from landlords are expected to approximate $1.6 million. As part of our long-term strategy to grow our store base and increase our distribution capabilities, we are in the process of redesigning certain elements of the material handling system in our distribution center. Accordingly, we anticipate expending $1.5 million on these elements during fiscal 2010 of which $550,000 was expended through the end of the first quarter. The remaining capital expenditures are expected to be incurred for various other store improvements, along with continued investments in technology and normal asset replacement activities. The actual amount of cash required for capital expenditures for store operations depends in part on the number of new stores opened, the amount of lease incentives, if any, received from landlords and the number of stores remodeled. The opening of new stores will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending in areas we target for expansion.
Our current store prototype uses between 8,000 and 12,000 square feet depending upon, among other factors, the location of the store and the population base the store is expected to service. Capital expenditures for a new store in fiscal 2010 are expected to average approximately $347,000 with landlord incentives expected to average approximately $96,400. The average inventory investment in a new store is expected to range from $325,000 to $500,000 depending on the size and sales expectation of the store and the timing of the new store opening. Pre-opening expenses, such as advertising, salaries and supplies, are expected to average approximately $92,000 per store in fiscal 2010. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period they are incurred. The total amount of pre-opening expense incurred will vary on a store-by-store basis depending on the specific market and the promotional activities involved.
Our unsecured credit agreement provides for up to $50.0 million in cash advances and commercial and standby letters of credit with borrowing limits based on eligible inventory. It contains covenants which stipulate: (1) Total Shareholders' Equity, adjusted for the effect of any share repurchases, will not fall below that of the prior fiscal year-end; (2) the ratio of funded debt plus rent to EBITDA plus rent will not exceed 2.5 to 1.0; and (3) cash dividends for a fiscal year will not exceed 30% of consolidated net income for the immediately preceding fiscal year. We were in compliance with these covenants as of May 1, 2010. Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion. As of May 1, 2010, there was $6.0 million in letters of credit outstanding and $44.0 million available to us for additional borrowings under the credit facility.
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Shoe Carnival Inc. has a market cap of $282.1 million; its shares were traded at around $21.42 with a P/E ratio of 13.5 and P/S ratio of 0.4. SCVL is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Net sales increased $22.2 million to $189.5 million, a 13.3% increase over the prior year. During the first quarter of fiscal 2010, our comparable store sales increased 13.1%, which represents the highest quarterly comparable store sales growth achieved in the history of Shoe Carnival. Our sales gains were largely driven by an increase in the number of footwear units sold as the consumer responded favorably to our assortment of footwear. We also raised our average price through an increase in the sale of higher priced footwear and by operating in a less promotional selling environment than during the comparable prior year period. Our gross profit margin increased to 31.3% from 27.9% in the first quarter of fiscal 2009. Significantly reduced promotional activity combined with strong sales of athletic and toning footwear as compared to the prior year resulted in our merchandise margin increasing 2.2%. Buying, distribution and occupancy costs decreased 1.2%, as a percentage of sales, due to the leveraging effect of higher sales. Selling, general and administrative expenditures remained well controlled and decreased 0.6% as a percentage of sales as compared to the first quarter of fiscal 2009. We generated $7.0 million of cash from operating activities (net of purchases of property and equipment) and ended the first quarter of fiscal 2010 with $51.8 million in cash and cash equivalents and no interest bearing debt. 15Net sales increased $22.2 million to $189.5 million during the first quarter of fiscal 2010, a 13.3% increase over the prior year's net sales of $167.3 million. Comparable store sales increased a record 13.1%, or approximately $21.0 million, compared to the prior year period. The three stores opened in the first quarter of fiscal 2010 along with the effect of a full quarter's worth of sales from the 16 stores opened in fiscal 2009 contributed an additional $4.9 million in sales. These sales increases were partially offset by the $3.7 million of sales lost from the stores which were closed since the beginning of fiscal 2009.
Selling, general and administrative expenses increased $4.2 million in the first quarter of fiscal 2010 to $44.3 million; however, our sales gain enabled us to leverage these costs by 0.6% as a percentage of sales. Expense associated with incentive compensation increased $3.6 million during the first quarter of fiscal 2010, as compared to the prior year period, due to our improved financial performance. Also during the first quarter of fiscal 2010, we recorded a non-cash asset impairment of $1.1 million related to certain underperforming stores. These increases were partially offset by a $915,000 decrease in our self-insured health care costs as compared to the first quarter of fiscal 2009 when we experienced unusually high claim activity. The costs related to our self-insured health care programs are subject to a certain degree of volatility and can vary materially between reporting periods.
We expended $3.3 million in cash during the first quarter of fiscal 2010 for the purchase of property and equipment, of which $1.2 million was for new stores, remodeling and store relocation activities. Additional capital expenditures of approximately $10 million to $11 million are expected to be made over the remainder of fiscal 2010. Included in this range of expenditure, is an additional seven stores at a projected cost of approximately $2.5 million and up to $4.6 million of store remodeling and relocation costs. Additional lease incentives to be received from landlords are expected to approximate $1.6 million. As part of our long-term strategy to grow our store base and increase our distribution capabilities, we are in the process of redesigning certain elements of the material handling system in our distribution center. Accordingly, we anticipate expending $1.5 million on these elements during fiscal 2010 of which $550,000 was expended through the end of the first quarter. The remaining capital expenditures are expected to be incurred for various other store improvements, along with continued investments in technology and normal asset replacement activities. The actual amount of cash required for capital expenditures for store operations depends in part on the number of new stores opened, the amount of lease incentives, if any, received from landlords and the number of stores remodeled. The opening of new stores will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending in areas we target for expansion.
Our current store prototype uses between 8,000 and 12,000 square feet depending upon, among other factors, the location of the store and the population base the store is expected to service. Capital expenditures for a new store in fiscal 2010 are expected to average approximately $347,000 with landlord incentives expected to average approximately $96,400. The average inventory investment in a new store is expected to range from $325,000 to $500,000 depending on the size and sales expectation of the store and the timing of the new store opening. Pre-opening expenses, such as advertising, salaries and supplies, are expected to average approximately $92,000 per store in fiscal 2010. Pre-opening costs, such as advertising, payroll and supplies, incurred prior to the opening of a new store are charged to expense in the period they are incurred. The total amount of pre-opening expense incurred will vary on a store-by-store basis depending on the specific market and the promotional activities involved.
Our unsecured credit agreement provides for up to $50.0 million in cash advances and commercial and standby letters of credit with borrowing limits based on eligible inventory. It contains covenants which stipulate: (1) Total Shareholders' Equity, adjusted for the effect of any share repurchases, will not fall below that of the prior fiscal year-end; (2) the ratio of funded debt plus rent to EBITDA plus rent will not exceed 2.5 to 1.0; and (3) cash dividends for a fiscal year will not exceed 30% of consolidated net income for the immediately preceding fiscal year. We were in compliance with these covenants as of May 1, 2010. Should a default condition be reported, the lenders may preclude additional borrowings and call all loans and accrued interest at their discretion. As of May 1, 2010, there was $6.0 million in letters of credit outstanding and $44.0 million available to us for additional borrowings under the credit facility.
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