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SHOE CARNIVAL INC (SCVL)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 delivered an EPS beat and revenue miss: diluted EPS $0.70 vs S&P Global consensus $0.607*, while revenue was $306.4M vs $314.5M*; gross margin reached 38.8% (up 270 bps YoY), the strongest Q2 margin in years .
  • FY2025 guidance tightened: Net sales lowered to $1.12–$1.15B (from $1.15–$1.23B), GAAP EPS raised at the low end to $1.70–$2.10 (from $1.60–$2.10), gross margin raised to 36.5–37.5% (from 35–36%), SG&A to $355–$360M, and capex to $45–$55M .
  • Q3 FY2026 outlook: sales $290–$300M and EPS $0.50–$0.55 vs S&P Global consensus revenue $297.2M* and EPS $0.53* (midpoints broadly in line) .
  • Strategic pivot accelerates: 44 YTD rebanners; 20 conversions in Q2; plan to reach 145 Shoe Station stores by year-end 2025 (~34% of fleet) and majority Shoe Station by Back-to-School 2026 (tipping point to portfolio growth) .
  • Balance sheet/cash: debt-free; quarter-end cash & securities $91.9M; inventory up 5% (to $449.0M) to support Back-to-School; August month-end cash & securities ~ $148M (up >10% YoY) after strong August cash generation .

Values marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Margin-led beat: Q2 gross margin expanded 270 bps to 38.8% (merchandise margin +390 bps, partially offset by 120 bps BD&O deleverage), enabling EPS of $0.70 despite lower sales; management emphasized margin discipline and mix shift to Shoe Station’s higher-income customer base .
  • Back-to-School momentum: Fiscal August delivered positive company comps, high-single-digit comps at Shoe Station with margin expansion, and positive children’s comps at Shoe Carnival; management: “we delivered positive comparable store sales … and margin expansion across all banners” .
  • Rebanner execution: YTD Shoe Station rebanners up high-single-digit comps through August, with ~270 bps margin expansion; CEO: “By Back-to-School 2026, Shoe Station will be our majority concept,” positioning for sustained growth .

What Went Wrong

  • Top-line pressure: Net sales fell 7.9% to $306.4M; comparable sales -7.5%; Shoe Carnival net sales -10.1% as the sub-$40k income consumer stayed pressured; EPS down YoY to $0.70 from $0.82 .
  • Rebanner drag/SG&A deleverage: Rebanner investments reduced Q2 EPS by ~$0.21 and added ~200 bps to SG&A rate; BD&O deleveraged 120 bps on lower sales and conversion-related downtime .
  • Elevated inventory/visibility: Inventory up 5% YoY to ensure in-stock for peak periods; management acknowledged “we have too much” but views it as strategic; tariff and supply chain clarity will drive normalization in 2026 .

Financial Results

P&L and Margin Summary (chronological: oldest → newest)

MetricQ2 FY2025Q1 FY2026Q2 FY2026
Revenue ($USD Millions)$332.696 $277.715 $306.388
Diluted EPS ($)$0.82 $0.34 $0.70
Gross Profit Margin (%)36.1% 34.5% 38.8%
Operating Income ($USD Millions)$30.079 $11.965 $25.228

Consensus vs Actual (Q2 FY2026)

  • EPS: Actual $0.70 vs S&P consensus $0.6067* → Beat
  • Revenue: Actual $306.388M vs S&P consensus $314.482M* → Miss

Values marked with * are from S&P Global.

Segment/Banner Highlights (Q2 FY2026)

  • Shoe Station: net sales +1.6% YoY; comps ~flat in Q2; fiscal August comps high single digits with margin expansion .
  • Shoe Carnival: net sales -10.1% YoY; August positive comps in children’s while maintaining pricing discipline .
  • Rogan’s: >$20M net sales; positive comps in August; integration on plan .

KPIs and Operating Drivers

  • Comparable sales: -7.5% total company in Q2 (approx. -100 bps impact from store closures during conversions) .
  • Merchandise margin: +390 bps YoY on pricing discipline, mix shift to Shoe Station, and better in-stock availability; BD&O deleverage: -120 bps .
  • Rebanner EPS impact: ~$0.21 drag in Q2; ~$0.36 YTD; FY drag now expected ~$0.70 (≈$25M operating income impact) .
  • Cash & liquidity: quarter-end cash+securities $91.9M; August month-end ~$148M (up >10% YoY) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY2025$1.15B–$1.23B $1.12B–$1.15B Lowered
GAAP EPSFY2025$1.60–$2.10 $1.70–$2.10 Raised (low end)
Gross Profit MarginFY202535%–36% 36.5%–37.5% Raised
SG&AFY2025$350M–$360M $355M–$360M Slightly higher low end
Capital ExpendituresFY2025$45M–$60M $45M–$55M Tightened
Net SalesQ3 FY2026—$290M–$300M Introduced
EPSQ3 FY2026—$0.50–$0.55 Introduced

Interpretation: Management tightens sales lower, raises margin/EPS lower bound given structural gross margin uplift, while acknowledging ongoing top-line pressure and rebanner costs .

Earnings Call Themes & Trends

TopicQ4 FY2025 (Q-2)Q1 FY2026 (Q-1)Q2 FY2026 (Current)Trend
Rebanner acceleration (Shoe Station)Launched national expansion; 50–75 rebanners FY25; 218 stores (51%) by 24 months; 2–3 yr payback; FY25 P&L drag ~$0.65 Plan raised to 75 rebanners in FY25; ≥51% by BTS’26; exploring 80%+ by 2027 44 YTD conversions; 20 in Q2; 145 SS by YE; majority by BTS’26 Positive; faster execution
Margin strategyAbove 35% GM 4th straight year; targeted promos, mix Margin discipline; Q2 GM guide 36–36.5% GM 38.8% (+270 bps); merchandise margin +390 bps Improving structurally
Consumer mixLower-income Carnival pressured; event periods stronger Station comp positive; Carnival weak nonevent Station outperforms; Carnival managed as “cash generator” Mix shifting to higher-income
Inventory postureElevated into Q1 to hedge tariffs/disruptions Intentional higher inventory; focus on key items “We’re heavy” by design; normalize in 2026 Elevated but strategic
Tariffs/vendor pricingUnsettled; modest mid-single price increases expected No major surprises vs guide; opportunistic buys Vietnam +10%; expecting ~5–7% increases into Spring’26 Headwind manageable
Digital/AI CX——Composable, AI-powered search/content stack (Algolia/Amplience) driving conversion lift and productivity (case study) Ongoing capability build

Management Commentary

  • “We beat earnings consensus by over 20% and expanded gross margins 270 basis points to 38.8%, our strongest Q2 margin in years.” — CEO Mark Worden .
  • “When Station hits 51% of our fleet next year, the math flips. Station growth begins to overtake Carnival decline.” — CEO .
  • “We are investing approximately $25 million this year in our rebanner strategy with an expected two to three year ROI payback.” — CEO .
  • “Our gross profit margin of 38.8%… merchandise margins improved 390 bps… offset by 120 bps of BD&O deleverage.” — CFO Patrick Edwards .
  • “We’re managing the Carnival banner as a cash generator… maintaining margin discipline versus chasing low-quality sales.” — CEO .
  • “We have too much [inventory]… in places we feel good about… we do not see that margin erosion becoming relevant this fiscal year.” — CEO .

Q&A Highlights

  • Margin vs sales trade-off: Management prioritized margin dollars over chasing lower-quality sales; opportunistic lower-cost inventory and Station outperformance drove the margin beat despite softer sales .
  • Q3 cadence: Sales guide implies -2% to -5% YoY; GM expected +100–150 bps YoY to ~37–37.5%; SG&A ~$95M, similar to Q2 .
  • Inventory risk: Elevated inventory concentrated in key items and opportunistic buys (sandals 2026, kids athletics); management does not expect margin erosion from clearance in FY2025 .
  • Tariffs/pricing: Vendors signaling ~5–7% price increases into Spring’26 amid China/Vietnam tariffs; guidance assumes modest increases .
  • Timeline to inflection: As Shoe Station surpasses 51% by BTS’26, management expects total company comps to turn positive in H2 FY2026 (low-single digits) with Carnival still a headwind .

Estimates Context

  • Q2 FY2026 vs S&P Global consensus: EPS $0.70 vs $0.6067* (beat); Revenue $306.388M vs $314.482M* (miss) . Note: Management stated “profits beating consensus by over 20%,” while S&P Global implies ~+15% EPS beat; methodology differences likely explain the gap .
  • Q3 FY2026: Company guides sales $290–$300M and EPS $0.50–$0.55 vs S&P Global consensus revenue $297.199M* and EPS $0.53* — broadly in line at midpoints .

Values marked with * are from S&P Global.

Estimates and Guidance Snapshot

PeriodRevenue ($M)EPS ($)
Q2 FY2026 Actual306.388 0.70
Q2 FY2026 S&P Consensus*314.482*0.6067*
Q3 FY2026 Guidance290–300 0.50–0.55
Q3 FY2026 S&P Consensus*297.199*0.53*

Values marked with * are from S&P Global.

Key Takeaways for Investors

  • The quarter was margin-led: structural gross margin uplift from mix (Shoe Station), pricing discipline, and better in-stock drove EPS upside despite sales pressure — a supportive setup for valuation re-rating if sustained .
  • FY guide quality improved: lower sales but higher gross margin and higher EPS low end — focus on profitability over volume; watch execution through holiday and Spring’26 .
  • Rebanner is the catalyst: accelerating toward majority Shoe Station by BTS’26 with compelling 2–3 year payback; each quarter of conversions should gradually improve mix and margin resilience .
  • Near-term risks: Carnival banner remains a headwind outside event periods; elevated inventory and tariff-driven pricing require careful execution, but management’s stance/visibility appear balanced .
  • Q3 setup: Guidance aligns with S&P Global midpoints; monitor August run-rate carry-through, gross margin execution, and SG&A control into holiday .
  • Liquidity strength: zero debt, growing cash, and ~$50M buyback capacity provide flexibility to fund rebanners and opportunistic M&A without stressing the balance sheet .
  • Narrative to watch: Station scale reaching the 51% “tipping point” in 2026 is the story-changing milestone; sustained margin outperformance and comp stabilization are likely stock drivers .

Appendix: Prior Quarter Context (for trend analysis)

  • Q1 FY2026: Net sales $277.7M (-7.5%), EPS $0.34 (rebanner drag ~$0.15); GM 34.5% (merch margin +50 bps; BD&O deleverage) .
  • Q4 FY2025: Net sales $262.9M; Adjusted EPS $0.54; FY2024 GM 35.6%; initiated rebanner plan (50–75 stores in FY2025; 2–3 yr payback) .