Shoe Carnival plans to surpass 500 stores by 2028
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Through organic growth and strategic mergers and acquisitions, Evansville-based Shoe Carnival Inc. anticipates exceeding 500 stores and becoming a multi-billion-dollar retailer by 2028. The company’s long-term growth strategy also includes significant investment in customer relationship management capabilities, e-commerce infrastructure and store fleet modernization.
In February, the 46-year-old company reached a record high of 429 stores and expanded into its 36th state by acquiring Wisconsin-based Rogan Shoes Inc. Under the Rogan’s, Shoe Station (acquired in 2021) and Shoe Carnival banners, the business expects to grow net sales in fiscal year 2024 despite reporting a full-year profit fall in fiscal year 2023, which ended on Feb. 3. Shoe Carnival’s first quarter 2024 earnings results will be released on May 23.
“We are well positioned to advance our strategy to be the nation’s leading family footwear retailer by accelerating growth as well as pursuing additional growth initiatives and M&A opportunities in the future,” CEO Mark Worden said in a news release on March 21.
Fiscal year 2023 results
In March, Shoe Carnival revealed a fiscal year 2023 net income of $73.3 million, a drop from $110 million the prior year. The company reported fiscal year net sales of just under $1.2 billion, slightly lower than the last year.
“2023 was a challenging year. It was a challenging year for the whole family footwear industry,” Steve Alexander, vice president of investor relations and financial planning, told Inside INdiana Business. “With the backdrop of interest rates and inflation, that lower-income, urban consumer, which is mostly Shoe Carnival, has certainly been impacted.”
Though net sales were lower than fiscal year 2022, the results were at the top end of company expectations, fueled by strong sales growth at the end of the year.
“Think back to school, the most recent holiday in December … consumers are responding. But during those, I’ll call it between event periods, sort of lull shoulder periods, last year, traffic was a challenge,” Alexander said.
Shoe Carnival has ended the fiscal year with no debt for 19 consecutive years, using operating cash flow to fund its investments and operations. At the end of fiscal year 2023, the company had about $111 million in cash, cash equivalents and marketable securities, a $47 million increase in cash and cash equivalents over fiscal year 2022.
“It’s very, very prudent management around the balance sheet in terms of working capital and forecasting, the operations cost of the business versus the cash flow generated,” said Alexander. “When you look at our history of increasing dividends, you look at our history of no debt and funding operations and acquisitions with cash on hand, that says a lot about a business. And our balance sheet is very strong.”
Rogan Shoes Inc. acquisition
Before joining Shoe Carnival, Rogan’s was a family-owned footwear company founded in 1971 and headquartered in Racine, Wisconsin.
“The Rogan family, certain members were ready to retire. Jim Rogan’s going to stay on with us. He’s a vice president and reports to Mark Worden,” said Alexander. “It was a deal that was conducive. They were ready to do a transaction, and we were certainly happy to do it.”
The $45 million all-cash deal added 28 store locations in Wisconsin, Minnesota and Illinois to Shoe Carnival’s footprint. The store base in Minnesota is expected to create additional expansion opportunities.
“Rogan’s is almost like a Shoe Station of the upper Midwest in terms of customer demographics and size,” Alexander said. “It’s a great business. It does very well. And we’re very pleased about the acquisition. The valuation was very fair.”
In February, Shoe Carnival expected to realize Rogan’s full synergy expectations of $1.5 million by fiscal year 2026. However, those numbers were updated in March during the release of the fiscal year 2023 results.
“Very close in, very encouraged with the progress and integration today,” said Alexander. “We announced that we’d increase that synergy realization to $2.5 million. And we expect to realize those full synergies in fiscal 2025.”
With a payroll of more than 600 people, it remains unclear how the Shoe Carnival acquisition will affect those jobs.
“We’ve got an integration plan. It’s going to run for 18 months, so we’ll see. But we’re going to be very contemplative about the integration. I can’t say anything specific, but no changes anytime soon,” Alexander said.
Fiscal year 2024 outlook
Shoe Carnival’s store fleet modernization, including digital engagements and entertainment activities, will continue into fiscal year 2024. This year, total capital expenditures are expected to range from $25 to $35 million as the initiative wraps up. About 60% of the project was completed as of February.
“It’s a journey we’ve been on for a couple of years now. We’ve been very pleased with the results,” said Alexander. “You’ll see, in the middle, there is either an athletic shop or a Nike-branded athletic shop. And then the aisles, down the left and the right, very well organized.”
The company also plans to attract more customers to its e-commerce platform and grow omnichannel sales.
“You’re going to have customers that are brick-and-mortar. Then you’re going to have customers that are e-commerce. But you have a lot of consumers that do both. You have customers who use e-commerce for research and product assortment and selection. But then depending on the nature of the purchase, they may go into the store,” Alexander said.
Toward the end of the first quarter, Alexander was optimistic about increasing net sales in 2024, which the company expects to grow 4% to 6% over fiscal 2023.
“Sandal season and going into Easter has been very encouraging. We’re seeing sales growth in the low-mid-single digit range. We’ve seen some acceleration in March. So that makes us think with our new marketing campaign and our assortment that consumers are responding during this event period,” he said. “We’ll just have to wait and see how consumers are doing this year between those lull periods.”