Shoe Carnival Inc. (NASDAQ:SCVL) Q3 2017 Earnings Conference Call Transcript

Nov 16, 2017 • 04:30 pm ET

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Shoe Carnival Inc. (NASDAQ:SCVL) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good afternoon and welcome to the Shoe Carnival's Third Quarter Fiscal 2017 Earnings Conference Call. Today's call is being recorded. It is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited.

(Forward-Looking Cautionary Statements) I'll now turn the call over to Mr. Cliff Sifford, President and Chief Executive Officer of Shoe Carnival for opening comments. Mr. Sifford, you may begin.

Executive
Clifton Sifford

Thank you, and welcome to Shoe Carnival's Third Quarter Fiscal 2017 Earnings Conference Call. Joining on the call today is Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer. On today's call, I'll provide a brief overview of our third quarter performance, and give you an update on our 2017 guidance. Kerry will review the financial results, then we'll open up the call to take your questions.

Over the past several years, we have been building and executing a multi-faceted digital presence with the goal of engaging our customers across all channels. Our initiatives have been focused on building a fun, exciting and memorable experience for our customers, regardless of how they choose to shop with us. We have enhanced our store experience through the addition of shop in shops, which highlight key brands and/or classification. In this year, we have re-platformed our e-commerce site to enhance performance and reliability. We launched the SMS program for those customers that prefer to hear about the latest Shoe Carnival experience via text, and we began to refocus our marketing spend away from traditional marketing venues to a more robust always on digital program.

In a quarter that saw traffic impacted by three hurricanes, affecting Texas, Florida and Puerto Rico, our traffic for the third quarter was only down low single digits. Our merchant team provided our customer with a great selection of the seasons' most important styles that drove the mid-single-digit increase in units per transaction and a low single-digit increase in conversion. This led to a comparable store sales increase of 4.4% for the third quarter. Each geographic region from the north to the deep south, with the exception of Puerto Rico, all reported positive comparable store sales increases for the quarter.

Our stores in Puerto Rico experienced a total comparable store sales loss in the teens due to the devastation of Hurricane Maria. As of today, we have three of the non-Puerto Rico stores open with the possibility of getting one additional store open before the year-end. The remaining five stores will be a longer-term project, with some that may be closed permanently. I'll remind you that we impaired seven Puerto Rico stores in the fourth quarter of fiscal 2016.

We ended the quarter with inventory down 4.3% on a per-store basis, which was in line with our expectations. Our plan remains to end the year with per store inventories down mid-single digits. Our merchandise margin decreased 80 basis points, while BD&O was down 70 basis points as a percentage of sales. SG&A was leveraged 70 basis points primarily due