Shoe Carnival, Inc.

Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. I would now like to introduce Mr. Steve Alexander with Shoe Carnival Investor Relations. Mr. Alexander, please go ahead.

Thank you and good morning. Thanks for joining us today. Earlier this morning, we issued our earnings press release for the first quarter of 2024. If you need a copy of the release, it is available on our website in the Investors section. Joining me on today's call are Mark Warden, President and Chief Executive Officer of Shoe Carnival, Carl Scibetta, Chief Merchandising Officer, and Patrick Edwards, Chief Financial Officer. The management's remarks today may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with a discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. Today's call will reference non-GAAP measures. The non-GAAP or adjusted results referenced exclude the purchase accounting, merger, integration, and transaction costs related to the acquisition of Rogan's shoes. A reconciliation of GAAP to non-GAAP results is included in this morning's release. And with that, I'll hand the call over to Mark.

Thank you, Steve, and good morning, everyone. Let me start today by saying that sales momentum is accelerating across the company. We gained significant market share during the quarter. Our new digital-first marketing plans worked, and we sold a ton of sandals at Shoe Carnival. During the quarter, net sales grew 6.8% to $300.4 million. Our sales growth surpassed the high end of our expectations for the quarter, and there are four key drivers I would like to highlight. First, SHU Station net sales grew faster than planned, increasing low double digits as we entered new markets, engaged new customers, and continued to rapidly grow share in the existing markets we serve. Second, E-commerce sales continued to grow double-digit during the quarter, driven by the relaunch of shoecarnival.com in the third quarter of 2023. That relaunch enhanced the customer experience and is driving significant gains in customer conversion and ultimately in sales growth. Additionally, our launch of shoestation.com in early 2023 continues to drive growth as the platform scales up customer acquisition. Third, Rogan's, which we acquired during the middle of February 2024, delivered first quarter net sales in line with our expectation. The integration is progressing ahead of schedule and we continue to be on pace to deliver the increased synergies in fiscal 2025 as discussed last quarter. Fourth, and most encouraging to me, during the quarter, trends significantly improved at our shoe carnival banner when we kicked off our new digital-first marketing campaign. The customer response to our sandal assortment has been outstanding, with total sales growth of 14% in sandals during the quarter and accelerated sales growth in April after the Easter holiday period ended. The results are clear. Our new digital-first marketing approach and compelling product assortment are working. We launched the new Sandal Season Easter holiday marketing campaign about a month into Q1 and accelerated investments as spring weather progressed. Prior to the campaign launch, sales were soft in January and February, with a declining sales trend similar to non-event periods in the prior year. Once we started the new campaign, we saw an immediate improvement in results. During March, sales accelerated to single-digit growth early in the month and continued to accelerate significantly in the days leading up to Easter, with double-digit growth across both the SHU Station and SHU Carnival banners. Coming out of the Easter holiday event period, we saw encouraging sandal buying trends, so we continued to engage customers with our marketing campaign focused on social, digital, and targeted CRM activities. While April is not what I would consider a non-event period due to it being an important seasonal event month for us, it did provide some early insights about customer buying behavior. We need to see this play out over a longer time period to understand that this is a sustaining trend in 2024. but I can share that the customer was far more engaged and motivated to purchase across our banners, across our geographies, and across household income levels in both March and April as compared to January and February. We will be monitoring this encouraging pattern closely and investing appropriately into trends as they emerge ahead. Shifting from our sales growth to financial highlights in the quarter, We again delivered sustained margin performance in the quarter with gross profit margin expanding to 35.6%, representing the 13th consecutive quarter above 35%. Operating income in the quarter increased 7.5% and pre-tax income increased 8.5% to $23.2 million. Margin expansion over the long term has been a key driver of our profit transformation. led by our targeted promotional plans, smart buying strategies, and growth of our shoe perks CRM membership. I'm particularly pleased with the merchandise margin expansion achieved this quarter versus Q1 last year, and at the same time, we were able to grow sales ahead of our expectations. And compared to five years ago, gross profit margin in first quarter 2024 expanded 600 basis points and operating income grew 44% on sales growth of 18%, demonstrating our success to grow the business profitably over the long term. Our vision is to be the nation's leading family footwear retailer, and a core strategy of realizing this vision is profitable M&A activity. We've completed two acquisitions in our company's history. ShoeStation, which we acquired in late 2021, and then most recently Rogans, which we acquired in February 2024. Starting with ShoeStation, we completed the integration about a year ahead of schedule and achieved both the efficiencies and synergies that we expected. A little over two years later, ShoeStation continues to significantly grow sales ahead of the retail footwear category, grow profit, and expand margins. We have added new stores as part of growing the ShoeStation banner, and we are well positioned to continue expanding our market reach, engaging with new customers, and continue rapidly expanding the ShoeStation banner in the years ahead. We also launched the Shoestation.com website in early 2023, which is driving e-commerce growth. We've fully integrated ShoeStation into our ShoePerks platform and are leveraging our advanced CRM analytics and capabilities to drive deeper engagement with both new and existing customers. Moving to Rogans, which we acquired in February 2024. We're in the early stages of integration and continue to be encouraged with the progress. Rogan's delivered first quarter 2024 sales and profit results in line with our expectation, and we continue to expect that it will be accretive to our results in fiscal 2024. We also continue to expect that the level of accretion will increase meaningfully in fiscal 2025. As discussed previously, based on the early pace of progress of the integration, we accelerated the timeline, increased the expected synergy amount to $2.5 million, and accelerated the timing of the synergy capture entirely into fiscal 2025, rather than across fiscal 2025 and 2026. Today, we continue to expect full synergy capture in the amount of $2.5 million, and we continue to expect the entirety of those synergies will be realized in fiscal 2025. Additionally, we are on pace to have Rogans fully integrated into our Shoe Station growth banner operations in early 2025 and expect that Rogans will be a solid source of accretive profit growth in 2025 and beyond. In 2025, with Rogan's fully integrated, we believe that our Shoe Station banner will be even better positioned to drive sales and profit growth. Including Rogan's, Shoe Station is currently at 59 stores, and we expect to surpass the 100 store count sooner than planned as part of our long-term strategy to surpass 500 total stores in 2028. Shoe Station and Rogan's both demonstrate our successful approach to M&A as a key component of our long-term growth strategy. To date, we've largely focused on acquisitions that provide market leadership in their regions, are profitable, and give us the opportunity to expand our market presence or further penetrate existing markets. Going forward, we are well-positioned to continue pursuing M&A as part of our growth strategy. Our balance sheet is strong and we have zero debt. We have the flexibility to consider using equity or modest debt for the appropriate M&A opportunity, but given our solid cash position, funding M&A with cash flow from operations has been our approach, just as we did with Shoe Station and Rogan's. In addition to M&A, another key component of our growth strategy is to continue leveraging our advanced customer analytics and capabilities. By doing this, we can better identify customer priorities at a market level and drive engagement both in-store and online. One of the primary focus areas in this strategy is to evaluate data on community characteristics, purchasing trends, product assortment, and mix. We've gained valuable insights about our shoe station customer by doing this analysis and have defined many markets where shoe station stores can likely outperform. Specifically, we've identified existing shoe carnival locations where the customer and real estate characteristics better align with ShoeStation. We're now in the early test and learn development process of banner transitions, meaning closing an existing shoe carnival store and opening a ShoeStation store in the market where customer dynamics better fit our growth banner. It's very early days on executing the strategy, but I'm excited about what the data indicates regarding the potential for profitable growth in the years ahead. I'll have an in-market test to discuss at our next conference call, so stay tuned. Moving now to thoughts on the balance of fiscal 2024. As I discussed earlier, we are encouraged with the sales growth and profitability we achieved in the first quarter. We achieved sales ahead of our expectation and grew operating profit even faster than sales. Patrick will provide additional details in his remarks, but given the solid performance in the quarter, today we are reiterating our entire fiscal 2024 outlook. We are only two weeks into Q2, so I do not have a lot to share about this quarter yet, but I can provide a brief update on a few things we are seeing so far in May. First samples continue to sell very well with double digit growth in the first two weeks of May. And this is particularly encouraging as we are now in the peak selling period. Second, product gross margins remain strong and in line with what I would like to see for Q2. Third, we're continuing to see sales trends pace where I would like to see them to achieve our annual expectations across our banners. Last, we're now entering a non-event buying period until we get into back to school. It is not yet clear if the customer remains as cautious about buying in non-event periods as they were last year. We will continue to monitor customer buying behavior closely during this period before back to school starts and pivot accordingly. Before handing it to Carl to discuss Q1 category level performance, I'd like to share a few summary comments. We are encouraged by the results we achieved in the quarter. We delivered sales growth and operating profits higher than our expectations. We again delivered sustained gross profit margin performance, exceeding 35% for the 13th consecutive quarter. Sales growth in the quarter was led by continued strength in our shoe station banner, e-commerce, and Rogan's acquisition. Trends improved sharply at our shoe carnival banner during March and April. as we are having a strong start to the sandal season. Our digital-first marketing strategy is resonating with customers and our assortment of the right brands with the right depth is working. Our strategies to grow sales and increase profitability over the long term have put us in a competitive position of strength to continue growing market share and delivering shareholder value. Our long-term vision is clear, to be the nation's leading family footwear retailer. And I believe we are very well positioned to continue advancing toward that ambition in 2024 and beyond. And now I'll hand it over to Carl to provide further color on our categories performance.

Carl. Thank you, Mark. As you discussed, sales momentum accelerated across the business during the quarter. From a category perspective, both children's and adult athletics performed very well, and we did sell a lot of sandals at shoe carnivals. While competitive intensity remained high during the quarter, we delivered gross profit margin of about 35% for the 13th consecutive quarter, and we remained committed to our long-term profit transformation and targeted CRM strategies to continue delivering sustained gross profit margin performance. Our merchandise margin in the quarter expanded by 50 basis points versus prior year, primarily due to lower inbound freight and shipping costs. During the first quarter, we continued to further optimize our inventory levels. Inventory at the end of the quarter totaled $411.6 million, an increase of $22.1 million versus prior year, primarily reflecting the impact of the Rogan's acquisition in February 2024. Excluding the impacts of Rogan's, our merchandise inventory at the end of Q1 was lower by approximately 6% on a dollar basis than prior year, and on a unit basis, merchandise inventory was down approximately 9% versus prior year. Excluding the impacts of Rogan's inventory, we continue to expect fiscal 2024 year-end inventory to be approximately 20 million or 5% lower than fiscal 2023 year end, while maintaining the freshest product assortment for our customers. Now moving to sales by category for the quarter. Total Q1 comp sales were down 3.4%, which reflected our very strong performance in sandals, combined with growth in athletics. And as Mark discussed, our comp sales trend strengthened as the quarter progressed. From a category perspective, total adult athletics comp sales increased low single digits in the quarter. Comp sales in women's adult athletics were up by mid-singles, led by court and basketball. Comp sales in men's adult athletics were down low singles, with a decline in running partially offset by strength in training and walking. Children's comp sales were down very low single digit, with athletic low single digit and non-athletic down mid-single digit. The strong performance in children's athletic was led by court and running. The children's non-athletic performance was primarily due to softness in boots and dress, partially offset by solid growth in sandals. First quarter, comp sales in women's non-athletic footwear were down high single digit, with boots down low 20s. Dress and casual were both down high teens. Sport was down mid-teens, and sandals were very strong in the quarter, growing 14% with performance trends accelerating during the quarter, led by flat sandals, footbeds, and slides. Men's non-athletic comp sales were down mid-single digit. Dress was down low teens. Boots were down low double digit, and casual was down low single digit. In casual, canvas casuals were down, partially offset by strong growth in sandals. Coming out of the quarter, our inventory content is clean and in good position, including sandals. We are excited about the fresh new products coming to our stores in 2024. As our back-to-school inventory begins to arrive later this month and build in May and June, we are well positioned to win back-to-school by growing our children's business just as we did last year, providing the product assortment and mix that our customers want. And with this, I'll turn the call over to Patrick for a review of our financials. Patrick?

Thanks, Carl. Moving on to our financial results. Starting with top line, our net sales in Q1 were $300.4 million, an increase of 6.8% versus prior year. Rogan's and continued growth from Shoe Station, combined with strengthening trends at Shoe Carnival, were the key drivers to this strong performance. Going into a little more detail, SHU Station total sales performed very well with a low double-digit increase versus prior year on the strength of new stores and share growth in existing markets. SHU Carnival total sales came in at a low single-digit decline. While sales trends were soft early in the quarter, they strengthened as the quarter progressed and demonstrated comparable store sales growth versus prior year late in the quarter on the strength of sandals and athletics. Rogan's sales in the quarter approximated 19.6 million. As you will recall, we completed the Rogan's acquisition in mid-February of this year, and therefore only a partial month of Rogan's sales from February are included in our first quarter results. Consistent with previous guidance, we continue to expect full year 2024 net sales for Rogan's to approximate $84 million. As a result of the 53rd week in fiscal 2023 that will not recur in fiscal 2024, the calendar weeks in each quarter shift in 2024 as compared to prior year, which we discussed on our earnings call in March. On a comparable store sale basis, which excludes the impact of this calendar shift, Rogan's sales and other new store growth, net sales declined 3.4% for first quarter, representing a significant improvement versus comparable store sale trends in late fiscal 2023. As the first quarter progressed and we continue to execute our digital first marketing campaign, we saw strengthening comparable store sale trends, and those trends turned to low single digit growth versus prior year late in the quarter. Q1 gross profit margin expanded to 35.6%, marking the 13th consecutive quarter that our gross profit margin has exceeded 35%. Compared to Q1 2023, gross profit margin increased approximately 60 basis points, with merchandise margins increasing approximately 50 basis points, led by stable product margins and lower incoming freight and e-commerce shipping costs during the quarter. Buying distribution and occupancy costs were higher in the quarter, primarily due to increased rent associated with operating more stores. Despite these higher overall costs in the quarter, BDNO leveraged approximately 10 basis points on the higher sales delivery versus the prior year. SG&A expense in Q1 was $84.3 million, representing an increase of $6.7 million versus Q1 2023. Q1 SG&A increased on higher marketing investments that drove our strong sales performance in the quarter and higher selling expenses associated with Rogan's. As a percentage of net sales, our SG&A was 28.1%. We continue to expect synergies from the Rogan's acquisition into 2025, and we expect those synergies to lower our SG&A as a percentage of sales as they are achieved. Operating income in the quarter totaled $22.5 million. an increase of 7.5% versus prior year on a gap basis, and 9.8% on an adjusted basis. We were pleased that our operating income grew faster than net sales in the quarter. On a gap basis, operating income included approximately $500,000 of expenses from the Rogan's acquisition. Our income tax rate in the quarter was 25.4%. versus 22.6% in the prior year, resulting in a headwind to EPS of approximately two cents per share. This higher rate primarily reflects a lower benefit in fiscal 2024 from share settled equity awards. On a GAAP basis, net income for first quarter 2024 was 17.3 million or 63 cents per diluted share. On a non-GAAP basis, excluding the Rogan's related costs, adjusted net income for the first quarter was $17.7 million or $0.64 per diluted share. At the end of the quarter, we had total cash, cash equivalents, and marketable securities of approximately $69 million. Cash and cash equivalents increased over $24 million versus first quarter 2023 and cash flow from operations in the quarter increased approximately $15 million. 2023 fiscal year end marked the 19th consecutive year the company ended a year with no debt. And through the first quarter of 2024, we have continued to fund our operations and growth investments, including the acquisition of Rogan's in February 2024 from operating cash flow and without debt. During the quarter, we did not repurchase any shares and have $50 million available under our current share repurchase program. Inventory at the end of the quarter totaled $412 million, an increase of approximately $22 million versus prior year. The increase reflected Rogan's acquired inventory and the timing of purchases, partially offset by continued efficiencies from our ongoing inventory optimization improvement plan. As Carl discussed, we continue to expect inventory will be lower by approximately $20 million on our business, excluding Rogan's, by the end of the year. Moving on to our 2024 outlook. Based on first quarter results, today we reiterated our entire full year 2024 outlook. including net sales growth in a range of 4% to 6% versus fiscal 2023 and full-year fiscal adjusted EPS in a range of $2.55 to $2.75. The phasing of our Q2 and Q3 quarterly results versus the prior year will be significantly impacted by the retail calendar shift. One of our highest volume back to school weeks will move out of Q3 and into Q2. As a result, we are providing additional information on our expected second quarter net sales and second quarter EPS. We expect net sales for the second quarter to be about $330 million compared to $295 million in the prior year. This would be an increase in net sales of about 12% versus last year. This increase includes a benefit of approximately $20 million in the quarter as a result of the retail calendar shift. We expect a similar increase in our EPS, which would put EPS at about 80 cents in the quarter compared to 71 cents earned in last year's second quarter. We continue to expect the combined total of Q2 and Q3 sales growth in 2024 versus prior year to be in line with our full-year outlook of 4% to 6% net sales growth. To close, in the first quarter we delivered net sales growth of 6.8% and operating income growth of nearly 10% on an adjusted basis. Our strong balance sheet and cash flow continue to position us to fund internal growth, execute on desirable M&A opportunities, and the continued ability to deliver long-term shareholder return. As previously announced, we will hold our Annual Meeting of Shareholders on June 25, 2024, at 9 a.m. Eastern Time. The distribution of information to shareholders for the Annual Meeting began on May 14. This concludes our financial review. Now we would like to open the call up for questions. Operator?

Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up question. If you have any additional questions, you may rejoin the queue. One moment for your first question. And your first question comes from the line of Sam Poser with Williams Trading. Please go ahead.

Good morning, everybody. Thank you for taking my question. Just a follow-up on the calendar shift stuff in the second quarter. I believe on the first quarter call, or on the fourth quarter call, you inferred that it was going to be about a $25 million per quarter maneuver versus the 20 you just said. I'm going to make sure I got that right, but what changed if I did?

Hey, Sam. This is Patrick. Great question. Appreciate you asking it. The $25 million versus the $20 million, the difference is the amount of benefit that exists in the first quarter that shifted into there, which is about 2%. So just so I get this right, you...

you're losing, you're gaining a $25 million week and you're losing a $5 million week just at the beginning. You lost a $5 million week at the beginning of the quarter. But so my question on Q3 then is, theoretically in Q3, you wouldn't lose as much because I believe the last week with the shift in revenue in Q3 is bigger than the shift out in Q1. That's correct. And so you're losing 20 in Q... You're gaining 20 in Q... You're gaining 20 in Q2, and you're going to lose about 18 in Q3 or something like that?

I'll try to just reiterate what we said here one more time, and then... if necessary we can we can we can go a little bit deeper on it but our q2 net sales are going to be up 12 with 20 million of that caused by the shift and as you said 25 million coming in from q3 5 million coming out uh into q1 q q2 and q3 combined are going to be about flat leaving us with growth of four to six percent over both those periods and then you're right q4 uh has this more significant and material impact where we just completely lose that 53rd week in its entirety which is about 15 million dollars which

which is going to be offset by, what, about $35 million from Rogan's. So you lose $15, you gain $35. Yeah, I mean, it's like, yeah.

So, Sam, we know we've tried to, for Q2, we've tried to give a lot of increased color around this because of the complexity that you're dealing with right now and the complexity that most retailers are dealing with right now. So... Our goal is to provide a range around that $330 million in our EPS. And as we move through the year, we'll continue to do that. But the other elements of our growth and of our drivers, we're just not prepared yet to give that for Q2 or any other quarter. But for the full year, we're still expecting revenue growth of 4% to 6% on that unshifted basis and a cost decline of somewhere between down 3% to up one on a shifted basis.

Okay, thank you very much. I appreciate it and I may get back in, but thank you.

Your next question comes from the line of Mitch Cummins with C Corp Research. Please go ahead.

Yes, thanks for taking my questions. And I did kind of lose connection there for a few minutes. I apologize if you've already addressed something that I asked. I just want to start just, again, I want to get a little bit more color on the guide. So for 2Q, you've given us the sales. Can you say what comp and what Rogan's contribution are embedded in that sales number?

Hey, Mitch. It's Patrick. we are again trying to prepare a north star for everyone for the second quarter in the range of 330 million dollars on the top line uh we're not prepared to provide the individual other key drivers other than the impact of the shift which is about 20 million dollars can you say how much of the so you said 80 cents of burnings um and i know you said that obviously the earnings benefit from the sales shift but is there any way you can sort of isolate how much earnings are shifting from 2q from 3q to 2q right so we have a uh what we're providing is a 12 overall increase in our net sales and then what we're seeing is an overall increase in eps of the same about 12 percent in between the as as Mark mentioned, what we're seeing so far into Q2, stable margins, some increased selling expenses, and as I said, a higher tax rate. If you think about our tax rate in Q2 of last year, that number was about 22.3%. This year, it will be more like 26% in line with our annual guidance, and that creates a fairly sizable headwind to EPS in the quarter. So that is why we provided that sort of 12% top line and ended about 12% bottom line sort of point of view on growth in the quarter.

Okay. And then, Mark, you were starting to talk about, I think, some of the improved sales trend when I kind of lost my connection. So again, maybe you addressed this, but can you walk us through maybe the month in one queue and then kind of how that's progressed into early two queue, like maybe the comp by month and then what you're seeing through the first two weeks of May?

Sure, Mitch. Good morning. Thanks for joining. Really pleased with the progression as the quarter went. February was slow. And as we talked at the year end, we were just kicking off our new digital campaign as we were heading into tax mists and the sandal season. And as soon as we did that, along with Carl's team's outstanding sandal assortment, we saw the consumer respond immediately. Started, again, February was down, similar to non-event period last year. We got into early March, started growing low singles. Got towards Easter, we were growing double digit across banners. which was very encouraging to see it drive results at Carnival End Station. And then as we got into April, that was going to be our first big unknown. I said earlier, it's not really a non-event period because it's Sandals' core season kicking in, but nonetheless, we weren't sure April was going to look more like January or last year's non-events, or it would sustain trends. So we invested, and we continue to invest, like I said in the last call, in this marketing campaign and it worked. We accelerated Sandals after Easter. Our sales results accelerated across the company after Easter. And in fact, as Patrick mentioned, comp sales grew after Easter. Flipping into May, this looks very similar. We're kind of wrapping up and I'd say May still is giving us very encouraging results. I'm pleased with the margins. I'm really pleased with the sales across banners, look to be able to deliver what we said, and the campaign is working and we're keeping on going with it. I want to call the one thing, though, that I did say. We just don't know fully yet of what a non-event period is going to look like, and we're in that now until late July when back to school kicks in. I'm encouraged with what I've seen in the last 10 days or so, which are really non-events, but nonetheless, We're going into about two-month extended period where we're going to learn a lot about the customer's behavior.

And just as a follow-up to that, Mark, because I know you're somewhat hesitant to, you know, make any sort of projections on the business through these non-event periods, but I think what you said was that, you know, sort of April and early May are kind of event, non-event. Like... It's maybe an event because it's sandals, but it's not really an event because you don't have kind of the holidays like you did maybe in March with Easter. So are there any learnings? And actually, I think June historically is your biggest sandal month. So maybe you could kind of call June event. I don't know. But are there any sort of learnings that you kind of, when you reflect on April and early May, as it relates to sort of the digital first marketing campaign that really suggests that this is something that is working?

Yes. I mean, the results to get the comp growth post-Easter was very encouraging when we continued on with this digital social influencer work. We weren't originally going to do that, but we saw trends were strong with sandals coming out of Easter. We saw people were still responding, so we made the decision to increase investments, and it continued to work in April and continues to work in early May. I think the insect's too early to call, but I think what I'm most pleased about, I said in the call, we're seeing improved trends across all geographies. We're seeing improved trends across all demographics and across all banners. We didn't see that last year. And so I think that's a big change, that the campaign's working, the product is fresher, and the product's really resonating, particularly in Sandals that Carl brought in. So I really encourage Mitch, again, I think the next six to eight weeks are, we would call them really the most non-event of non-events. Sandals just becomes incredibly important, to your point. It's peak season. But there's no real spike in an event

until we get to bts so we're going to learn a lot but i like what i'm seeing very much these first couple weeks of may and then last one for me um for carl i just want to drill down on sandals a bit more because it sounds like you had a lot of success there um you know my sense is that you know early march was good weather-wise and the rest of the quarter was a little more inconsistent, and yet you guys had good sandal performance throughout. In fact, it sounds like it actually accelerated. So maybe, Carl, when you look at sandals, can you parse out how much is weather, how much is product, how much is inventory, how much is the digital marketing campaign behind the sandals? And again, going into really peak sandal season,

how much can we look at what's happened to sandal season to date and have that be you know a read-through to kind of the balance of the sandal season well sure mitch um first of all early on i would say uh we we did get some benefit early on from weather that weather was a little bit from a cold uh weather standpoint a little better than a year ago um But however, as we continue to move through April and early May, it's not as much of a factor. In fact, weather may not be a cold issue, but with the amount of storms and things coming through the heart of our business, weather certainly would have played an effect on traffic. That said, our sandal business continues to perform well. I think by category, the categories that we invested in are performing quite well. And it has taken, the sandal business has taken over other categories on the footwear business, as I talked about in my prepared remarks. So we feel good about where we are. We're focused. We've made the big items and categories bigger. And we do think there's some sustainability as we move forward in that category. to continue to outperform.

All right, that's very helpful. Thanks, guys.

Your next question comes from the line of Jim Chartier with Mona's Crispy Heart. Please go ahead.

Hi, good morning. Thanks for taking my questions. I guess given kind of the success of the digital marketing, how have your plans changed for the rest of the year from a marketing standpoint? And then what can you do to kind of minimize this non-event low that you're expecting or facing potentially in June and early July?

Hi, Jim. It's Mark. Good morning. Two things. First, we're going to continue the campaign investments between now and back to school. We liked the response to the campaign in the first two weeks of May. We loved it in April. So we're going to keep on testing to see if this investing in a non-event can continue to drive comps within the higher side of that range that we have for the year. Second, for back to school, we're fully committed to this approach. It worked to grow kids' business last year. It worked to grow our holiday business in total last year. It worked now again to drive growth beyond our expectations in Q1. expect the entirety and back to school. We will be on this campaign approach and we will probably be accelerating investments and we're ready to increase SG&A as appropriately responding as profitable margin gets thrown off and share keeps growing.

Great. And then for Rogan's, can you give us any color of what comp trends there look like? Is it more similar to Shoe Station or Shoe Carnival?

Sure. We don't really have comp trends. I think we'll go comp until next year. I can say it's a consistent business is what we're learning in this first quarter where it's really not like shoe carnival that spikes with events. We're seeing a much more stable. And we're only into about a quarter. And that's what we're seeing in early days. It's very stable. It's not as volatile towards economic activity. It has a more affluent customer that doesn't seem to react. to inflation as much, which we like, a very balanced, predictable business. It delivered right what we wanted to for the quarter, and we think we're squarely on target to be delivering that annual number that we've put out there already. So good start, real good start, and I love that the integration's faster than we thought, and we really believe that full increased synergy capture. I got a good line of sight to bringing that in in 2025. Great.

And then, Patrick, I think you said non-rogan inventory was down 6% in dollars, but 9% in units. What did ASPs look like in first quarter? And does it look like kind of a 3% ASP growth for kind of going forward? Is that the right way to look at it?

Hey, Jim, it's Carl. I'll tell you, you're pretty close. ASPs for first quarter were up about mid-single digits.

Okay, and is that sustainable? Is that kind of what you're seeing for the rest of the year?

Yes, I believe it is sustainable, and it's a reflection of some of the athletic inventory that's performing at a higher retail than the brown-shoe side of the business.

okay um all right thanks and best of luck your next question comes from the line of sam poser with williams trading go ahead um thank you um just to follow up on the rogan's business can you talk um now that you have it can you talk about what categories and so on you're really seeing the strength in and and where you see the opportunities initially

Sure, Sam. Hey, it's Mark. I'm really excited about the work business in particular that Robins brings. We knew that they were a leader in that category. They've got great breadth, great strength of brands, a really wide range that meets the Wisconsin and Upper Midwest consumers' work needs. So we think there's a lot to mine there and learn and to grow in the future. We also really like, as we think about them becoming part of the Shoe Station operations in early 2025, I really like the similarities in performance running and the high-end performance brands that Rogan's customers love. It really synchronizes great with Shoe Station, and we're going to be able to lean into that as well. And then I'll give you an opportunity, you didn't ask it, but their kids' business doesn't keep pace with the exceptional Shoe Carnival kids' business. So I think Carl and team are really excited about how we can take our strength and market leadership and kids from shoe carnival and build that as we get into 25, 26, uh, at the Rogan's banner.

Thank you. And then Carl, uh, two things for you. One, um, how much have you narrowed the mix, uh, like on narrow and deeper on key items, uh, year over year and two, Are you finding, and the confidence you have in the ASPs, which I understand is athletic, but it's also probably selling more regular price product or product at higher prices than you did a year ago. Do you have more product now that people are coming in and asking for, like within sandals or other categories? They just say, I want this particular shoe versus looking for a shoe and billing about to find it or brand for that matter.

Okay, I will tell you on the first part, Sam, you know, we continue to constantly attempt to optimize our assortment and squeeze down and focus in on categories and or items. We try to target percentage numbers, I would say as a percent, anywhere from high singles to low teens percent every year in its style count. Sometimes that varies throughout the season, but a major focus of ours is tightening the assortment, making big items bigger. The second part of your question, definitely, Sam, the consumer that we're finding right now is brand shopping. And they're coming in and they're looking for the hot brand in the category and they have faith in the styling and quality of that brand. So most definitely the key brands, the key iconic brands by category that we carry are performing very, very well. And then beyond that, we use, as you're aware, we have somewhat of a private label business that we use to drive those big items, and it's an item-driven business. But first and foremost, brands are on the customer's mind. As they're a little bit

little bit stressed with their their economic dollar they have faith in the quality and fit of the brands what are those strong brands well i can't go into that but i'm sure you know who they are all right guys thank you very much continued success thanks sam we have another question from the line of mitch comets please go ahead yeah i got a couple follow-ups um

Mark, you talked on Shoe Station, you mentioned the benefit of customer acquisition. Can you maybe elaborate on that? Are these Shoe Carnival customers that are kind of migrating over, or are these entirely new to the organization? And maybe you can say about them or how you're picking them up.

Sure, Mitch. Two things. We're gaining new customers in our existing markets. not from Shoe Carnival. We're taking market share in the existing legacy markets, Alabama, Mississippi, Florida, and our rural Georgia. We gained significant market share and continue to quarter after quarter. Second, with Shoe Station fully integrated into Shoe Perks and the shoestation.com fully launched, we're able to now reach other customers even beyond that footprint. And it's giving us a customer base in states that we don't have current store bases for us to allow to mine and understand these new markets outside of where we have stores are looking very appealing for future growth. So it's coming both market share growth as well as new markets where we don't have current stores.

And then in your prepared remarks, you briefly discuss this potential transition of some shoe carnival stores to shoe station stores. I know it's probably too early for me to ask, you know, what that might do in terms of kind of the P&L, but can you at least say, you know, how many stores you think might make sense for such a transition? I mean, is it 10 stores? Is it 50 stores? I mean, can you give us sort of a rough idea as to how meaningful this might be?

What I can say is we're looking at our 34 million customer base in shoe perks now, and we see a lot of locations where a shoe station store seems to fit the customer profile very well. We're not ready to give a range or a number at this moment in time because we're just getting deep into the data, and the data shows a lot of profitable growth opportunities ahead. And so, like I said in my prepared remarks, I'll have an in-market test that I can share at the next quarter. And we can give some insight as to where did we try this and how is it looking in terms of revenue upside as well as profit. But too early to give any feedback at this moment, Mitch. But stay tuned. Very excited about the data.

And then maybe one last thing. And it sounds like you guys are ahead of schedule on the Rogan's integration. Just looking at the website there, I don't get the sense that it's plugged in the shoe perks yet. Maybe it is. I'm just not seeing it, but talk about some of those things in terms of like getting it on board with the CRM loyalty, you know, any adjustments to the product assortment, like in terms of maybe bringing in some new brands. I know that you were able to kind of leverage, you know, your, your relationships with brands on shoe carnival to maybe do some things on shoe station. I don't know what you're looking to do at,

Rogan's but how quickly there and then like is there a digital marketing opportunity for Rogan's for back-to-school like there is with the other banners that's marked again thanks Mitch you're correct when you see it it is not integrated at all from a consumer standpoint it's not in their horizon over the next few months our focus in the 18-month integration plan is to have the business fully integrated by early 2025 and that will include becoming part of the SHU station operations that will include being part of the SHUstation.com experience for the customer, as well as being part of the SHU Perks loyalty program. But we expect all of that by early 2025 as we get into the new fiscal. Our focus right now is on blocking and tackling, getting really the back office integration done, getting operations and customer service done, and that's progressing. Very smooth, really pleased with that. But the customer-facing benefits we would see happening in 2025, early 2025, along with the full synergy capture.

Okay, thanks again. Good luck. Thank you.

We have another question coming from the line of Sam Poser. Please go ahead.

Just one last thing. What is the difference? I would assume that your average selling price at Shoe Carnival is lower than it is at Shoe Station and Rogan's. How many basis points higher is the average selling price relative to Shoe Carnival in Shoe Station and Rogan's?

Sam, good question. I would say the average transaction, we want to look at it that way, today in SHU Station is about 20% higher than SHU Carnival, and Rogan's is about 15% higher than SHU Station.

That's average transaction, not ASB.

Thank you.

At this time, there are no other questions, so I will hand the call back over to Steve Alexander for closing remarks.

Thank you. We're available all day, so please feel free to reach out with any follow-up questions. Regarding Q2 results, we intend to report in early September after Labor Day. including an update on back to school, which will essentially be complete at that time. So thanks again to everyone for joining the call today. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.