Shoe Carnival, Inc.
Q1 2015 Earnings Call Transcript

Published: 21 May 2015

[Operator:]

Please stand by, we’re about to begin. Good afternoon and welcome to Shoe Carnival’s Fiscal Year 2015 First Quarter Earnings Conference Call. Today’s conference is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. This conference 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 be considered in conjunction with the discussion of risk factors included in the company’s SEC filings today and today’s press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speaks 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 talked about during this conference call or contained in today’s press release to reflect future events or developments. I’ll now turn the call over to Mr. Cliff Sifford, President, Chief Executive Officer, Chief Merchandising Officer of Shoe Carnival for opening comments. Mr. Sifford, please begin.

[Clifton Sifford:]

Thank you, and welcome to Shoe Carnival’s first quarter fiscal 2015 earnings conference call. Joining me on the call today is Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer. For today’s call, I will give a high-level review of the company’s first quarter performance, along with a little color on the second quarter and full year guidance. Kerry will review the first quarter financial results. Then we’ll open the call to take your questions. We are pleased with our record sales results for the first quarter and our 3% comparable store sales increase. This strong performance came in spite of the fact we faced certain strong headwinds as we began the quarter, all which we outlined our last earnings call. The momentum we gained in January with the earlier tax refund season did not continue into February. In addition, we experienced 400 closed or partially closed store days in February and early March, due to the harsh winter weather that affected the Midwest. And lastly, the delay of new spring products due to the West Coast port issue. These headwinds produced a 5% comparable store sale loss in February. But once weather moderated and fresh spring product arrived in our stores, our customers responded and our comparable store sales rebounded. The sales increase for the quarter was broad-based with all merchandise departments producing positive comps. Store traffic for the first quarter was up slightly to the same time period last year, which is the second quarter in a row in which we have seen a reversal of the negative traffic trends most retailers have experienced over the past several years. Average dollar transaction, unit sales, and average unit retail all showed positive growth for the quarter on a comparable store basis. We added almost 750,000 members to our loyalty program Shoe Perks. Our Shoe Perks members spend on average almost 30% per transaction more than non-members and accounted for approximately 49% of our first quarter sales. Gross profit margin for the company remained flat at 29.5%, while SG&A as a percent of sales improved to 22.8% from 23% in the first quarter last year. EPS for the quarter increased 15.6% to $0.52 versus $0.45 for the same time period last year. We ended the quarter with inventory down approximately 2.9% on a per store basis, which was in line with our expectations. We continue to be very pleased with the performance of our online sales. Over the next several months, we’ll add an additional 100 stores to the 250 stores currently capable of fulfilling online orders every day. This week we’ll begin testing our Shoes2U [ph] initiative, which is the first step to creating an endless aisle experience for our customers. This is one of our most important initiatives for 2015. It will give our in-store customers access to the full breadth of our chain-wide assortment, which is far greater than the assortment available in any single store location. We will continue to invest in our multichannel initiative to not only meet or beat our customers’ expectation, but to capitalize on our increasing online traffic and optimize conversion rate. Additionally, we’ll make significant improvement to our mobile site which has become a meaningful part of our overall online sales. Our customers expect the seamless shopping environment with both a broad selection and depth of sizes regardless of how they choose to shop. Our multichannel strategy is making that possible. Turning now to real estate, over the past year, we have done extensive analysis on our existing store base. We are utilizing new technology that help us identify new trade areas for growth as well as identifying current trade areas where we may have a low volume store with limited opportunity for growth. We have decided over the next several years we will take our non-contributing stores that have minimal opportunity to improve and either renegotiate lease terms, relocate or close the store. As part of this initiative we closed six stores in the first quarter 2015. As of today, we have identified another four stores that will close before the end of the year. There are an additional four stores that could be closed by year-end depending upon ongoing negotiation with landlord. During the first quarter we opened up seven new stores and relocated one store, ending the quarter with 401 stores in 33 states and Puerto Rico. For the remainder of the year, we’ll open an additional 11 to 12 stores all in existing markets we currently serve. Through these actions over the next few years we should see improved operating margin and accelerated EPS growth. Moving on to merchandise, as I said earlier in this call, the increase we reported for first quarter was broad-based touching every major department. We are very pleased to see both units sold and average unit retails were up for the quarter. We believe this tells us our customers are pleased with their spring assortment. The consistent performer across all departments was from canvas footwear. However, we are also excited to see that women’s boots and sandals both performed very well. Women’s non-athletic department led the way with the mid-single-digit comp increase. This Easter is a key time period for the first quarter. I would like to address it separately, because Easter moves year-to-year between March and April. We believe the best way to talk about sales is by combining the two months as one period. For the two-month period of March and April comparable store sales for the company increased 6.7% versus the same time period last year. Women’s non-athletic and kids’ athletic were up high-single-digits on a comparable basis with every other major department posting mid-single-digit comps. Now I’d like to add some insight to our full-year guidance. We are pleased with the way our business trended for the first quarter and in particular the Easter season. Second quarter has started out with comparable store sales up significantly. However, as we look toward the end of the quarter and the start of the back-to-school season there had been some major changes in tax rebates. These date changes will shift approximately $7 million in sales out of the second quarter into third quarter. Let me explain. Last years in the market we serve, 13 states had tax-free holidays that celebrated or began at the end of July. This year, three of those states will continue their holiday at the end of July. Two states have either not-announced or have cancelled their tax-free holiday and eight states will shift their tax-free celebration to August. With these shifts and tax-free in mind, we believe second-quarter comparable store sales will be flat to up low-single-digits. As we look forward to the rest of the year, we’ll continue to plan conservatively, but with the ability to react quickly to opportunities as we did in the second-half of last year. This strategy allows us to continue to control our inventory and expenses, which should result in double-digit growth in earnings. Therefore, we still expect full-year net sales to be in the range of $977 million to $991 million with comparable store sales increase in the range of 1.5% to 3%. Earnings per diluted share are expected to be in the range of $1.42 to $1.48. This represents an increase of 12% to 17% over fiscal 2014 earnings per diluted share of $1.27. Now, I’d like to turn the call over to Kerry Jackson for more details on our financial results.

[Kerry Jackson:]

Thank you, Cliff. Net sales were $252.8 million for the first quarter of fiscal 2015, as compared to net sales of $235.8 million for the first quarter of fiscal 2014. The $17 million increase in net sales was driven by an increase of $13.4 million from the 38 new stores opened since the beginning of fiscal 2014, and a $7.1 million increase in our comp stores. These increases were partially offset by a $3.5 million loss in sales for the 13 stores closed since the beginning of fiscal 2014. Our gross profit margin for the quarter was 29.5% and remained flat from the prior year. The merchandise margin increased 10 basis points from Q1 last year, while buying, distribution and occupancy expenses increased 10 basis points as a percentage of sales. Selling, general and administrative expenses increased $3.3 million in the first quarter of fiscal 2015 to $57.7 million. As a percentage of net sales, SG&A decreased 20 basis points. The increase in SG&A was primarily due to a $3 million increase in expenses for new stores, net of expense reductions for stores that have closed since the beginning of fiscal 2014. Another increase in SG&A for the quarter was attributable to incentive and equity-based compensation expense, which increased $826,000 in the first quarter of fiscal 2015 compared to the same period last year. Pre-opening costs included in both cost of sales and SG&A decreased 67,000 in the first quarter of fiscal 2015 to $717,000. Store closing impairment charges included in both cost of sales and SG&A in Q1 this year were $169,000 compared to 63,000 in Q1 last year. The effective income tax rate for the first quarter fiscal 2015 was 38.8%, as compared to 39.7% for the same period in fiscal 2014. For fiscal 2015, we continue to expect our tax rate to be between 38.5% and 39%. Net earnings for the first quarter of fiscal 2015 were $10.4 million, or $0.52 per diluted share. For the first quarter of fiscal 2014, we reported net earnings of $9.2 million, or $0.45 per diluted share. Included in the earnings for Q1 this year is approximately $0.01 of additional distribution costs due to the West Coast port congestion. Now turning to our cash position and information affecting cash flow. No purchases have been made this fiscal year under our share repurchase program. We currently have $25 million available under our existing repurchase authorization. Depreciation expense was $5.6 million in Q1. The depreciation expense is projected to be approximately $23 million for the full fiscal year. Capital expenditures for fiscal 2015, including actual expenditures during the first quarter are expected to be between $24 million and $25 million. Approximately $8 million of the total capital expenditures are expected to be used for new stores and $7 million will be used for store relocations and remodels. Lease incentives are anticipated to be $5 million to $6 million for the year. My final comment today will focus on adding a little color on our earnings expectations for the second quarter this year. As Cliff said earlier, we expect our Q2 comp store sales to be flat to up low singles. Additionally, we expect our gross profit margin to increase nicely due to the improvement in our merchandise margins and SG&A should leverage a little. For the past two years in Q2, our merchandise margins have declined due to tepid response by customers to our spring merchandise and higher levels of clearance product. With better positioned inventory this year, we expect to recapture significant part of that two-year decline in our merchandise margins. This concludes our financial review. Now, I’d like to open up the call for questions.

[Operator:]

[Operator Instructions] And we’ll take our first question from Jeff Stein with Northcoast Research.

[Jeff Stein:]

Good morning, guys. First, a quick one for Kerry. You mentioned that you think you can capture a significant portion of the margin you gave back last year. So you dropped roughly 90 basis points last year. Do you think you can get more than half of that back, or how should we be thinking about the gross margin line?

[Kerry Jackson:]

Well, the 90 basis points is correct, but that was over two-year period. For the past two years, that has been the mark, the decline. I’d rather state qualitative and not quantitative on, since we’re only focused on giving annual guidance. So, we should be able to capture a significant piece of that.

[Jeff Stein:]

Got it. Okay. And wondering, given the fact that your loyalty program has been growing so dramatically. Are you using at all now for targeted personalization offerings to customers, that seems to be kind of the trend in the industry right now?

[Clifton Sifford:]

Jeff, we’re using this for marketing purposes, but we are not yet to the personalization standpoint. We will be there, however, working hard to get there, and we believe we’ll be there very shortly. But trust me, we market to our loyalty members often, we’re just not there from a personalization standpoint.

[Jeff Stein:]

Is that an initiative, Cliff, that we could expect this year, or is that probably 2016?

[Clifton Sifford:]

We’re doing everything we can to make it this year, Jeff. And we’d like to be there about fourth quarter, but I just - I’m not prepared to say, that’s going to happen.

[Jeff Stein:]

Okay. And with respect to e-commerce, so I was just kind of curious what percentage of returns are coming back to the stores?

[Clifton Sifford:]

Oh, that’s a great question. Coming back to the stores, we’re not tracking that. We are tracking what percentage are coming back to our DC and that is remarkably low at - as a - in a very low double-digit range. The reason we don’t track the returns to the stores is our goal is when they return them to the stores is to sell them something else and we’re pretty…

[Jeff Stein:]

Well, that - yeah, that’s right, I mean, if it’s a traffic driver, so…

[Clifton Sifford:]

Exactly.

[Jeff Stein:]

Yes.

[Clifton Sifford:]

We actually charge to return to the DC, we charge shipping to return to the DC, so it encourages our customers that bring the product back to the stores.

[Jeff Stein:]

Got it. Okay. And just with respect to average unit retails kind of for the balance of the season, do you see them continuing to move up relative to last year?

[Clifton Sifford:]

You know, I do and that’s not because of - necessarily because of cost increases, as because of the fact that any cost that’s going up is because we’re bringing variable product into the stores. So we expect to see average retail move up, as we expand our better selection of women’s product into more stores, and as we - as that product takes a larger percentage of the inventory.

[Kerry Jackson:]

Okay.

[Jeff Stein:]

And if I recall, Cliff, you were at roughly 140 stores with the better women’s product at fiscal yearend, and the plan was to get up to about 175 this year, or where are you at the moment?

[Clifton Sifford:]

We’re - we will hit the 175 for fall. At the moment, we’re still at the 140. We feel that we have learned, that’s the best time to add that better product for us and for our customer as in the second-half of the year.

[Jeff Stein:]

Okay. And one final question, can you talk about your plans for ad spending this year as a percent of sales, was up about 20 basis points last year, where do you see a trending if you hit your sales targets for this year?

[Kerry Jackson:]

Relatively flat to slightly down, Jeff.

[Clifton Sifford:]

Yes, that that’s exactly the answer I was going to give you. But he was looking at the report, so I wanted to make sure, it’s flat to slightly down.

[Jeff Stein:]

Okay, great. Okay, guys. Thanks a lot.

[Operator:]

The next question is from Eddie Plank with Jefferies.

[Edward Plank:]

Hey, good afternoon, guys. Thanks for taking the question. I’m wondering, can you just remind us what your comp cadence was in the second quarter last year. Obviously, it was down a couple of percentage points, but it was the worst month in June, July. I’m just trying to get a sense of the tailwind you might get into third quarter due to this tax-free shift.

[Clifton Sifford:]

Kerry is looking it up by month. But we - May was tough and June was tough. July got better. July was actually, if I remember correctly, very slightly positive.

[Kerry Jackson:]

Slightly positive.

[Edward Plank:]

Okay.

[Kerry Jackson:]

And May and June were negative about the same amount.

[Clifton Sifford:]

Yes.

[Edward Plank:]

Got it. And then thanks for the color on the margins Kerry for second-quarter. I guess, I’m just wondering then, does that imply any change to the thoughts on the full-year merchandise margin and gross margin or SG&A that you had kind of outlined in the first - for the first quarter - at the end of the quarter last March?

[Kerry Jackson:]

No, this was in line with our original expectations for the year. What we would intend to do is continue to focus on quantitative numbers on an annual basis, but as we approach each quarter we will give little qualitative information on - so you can better build your models and anticipate and firm up the coming quarter for your guidance. That’s why we’re giving that.

[Edward Plank:]

Got it.

[Kerry Jackson:]

But that was in line with what we had thought about it at the beginning of the year.

[Edward Plank:]

Okay. That’s helpful. And then one last one, with respect to the real estate strategy and the analytics you’re using, is there anything you can share there about the productivity or health of the locations that you’ve opened since you’ve been using this technology?

[Kerry Jackson:]

It’s been a learning experience. We brought the software in and we had our first model just over a little year ago. So we’re really too early in the process to declare a victory and move forward. Having said that, we are pleased with the stores that we’ve been opening this past year and we feel like there was, with the small amount of information we have available, that we’re seeing higher level success. Having said that, it isn’t all attributable to the software though; part of it is our evaluation process. We have a committee that looks at the real estate. We changed a lot of how we select real estate in addition to using a software that help us see things and the data that we may not see with our naked eye. So I think there’s a series of changes that we feel are going to make our new stores more productive.

[Edward Plank:]

Okay. Great. That’s all I have for now. Thanks for the color. Good luck.

[Clifton Sifford:]

Thank you.

[Operator:]

Thank you. Next question from Sam Poser with Sterne Agee.

[Sam Poser:]

Good afternoon, gentlemen. All right, what is up significantly mean? You said, you were up mids down, mid-single-digits in quarter today last year at this time.

[Clifton Sifford:]

We are up significantly. Here is the issue, Sam. As you build your model and - we’re up better than we were down this time last year so in the two-year average our business is better than it was over two year average. So the issue is that, as you build your model as aggressive as you are, you’ll build our comps at a higher rate for second quarter and we’re going to hit. You got to remember that $7 million shift out of second quarter and the third.

[Sam Poser:]

Even with my bad math I can pull $7 million off and get a number to get a little lower.

[Kerry Jackson:]

That’s the reason we spelled it out for you, Sam.

[Sam Poser:]

All right. And then just back to the gross margins for a second. In my model, your margins were - your gross total was down the 87 bps last year in the second quarter. It was actually up slightly in Q - you had some leverage in Q - the fixed cost leverage in Q2 2013, but your merch margins were up, down over the last two years. I mean, are we looking - I mean, you start telling us pats of it here, and then we have to build in ourselves. I mean, are we looking at gross margins up 50%, 60%, 70%, 20%, 30%, I mean, what - I mean, we don’t need - why be coy about this. You know what you want to tell us. Just tell us where you’re thinking.

[Kerry Jackson:]

What, Sam, I think we did, what we said is over a two year period. Our merchandise margins had decreased in second quarter 90 basis points.

[Sam Poser:]

Correct.

[Kerry Jackson:]

And we think we can recapture significant portion of that. We also said in my remarks that all the again in the gross profit line is going to come from the merchandise margin. So we’re saying that buying, distribution and occupancy costs are going to be relatively flat on a year-over-year basis. I think we’ve given you quite a bit to build your model with.

[Sam Poser:]

All right. And then, you sort of flew through some of the - you didn’t go through the normal details on the categories that you did - I mean, and I couldn’t tell if you were talking about Easter time period when you mentioned some of the categories. Can we work through women’s, men’s and athletic and kids as to where it was for Q2.

[Clifton Sifford:]

Well, what I think - for Q2 or Q1?

[Sam Poser:]

For Q1, I’m sorry, for Q1.

[Clifton Sifford:]

Yes, what I think I said was that every department - every major department was up, and that women’s non-athletic led the way. And I’ll tell you that men’s was up low-single-digit. Kids’ and athletic were up low, and women’s was up mid.

[Sam Poser:]

And with your boots and sandals businesses, that was, I guess, a late fall and then when spring kicked - when spring finally kicked in it did quite well. I mean, based on that combined 6%, 7% comp…

[Clifton Sifford:]

As well, I’ll tell you…

[Sam Poser:]

..for April, May together.

[Clifton Sifford:]

It’s going to be hard to believe but our boots business was actually good for Easter, I’d explain that. But our sandal business did kick in as soon as it turns warm and especially in the north, and was good throughout the first quarter once we got past February.

[Sam Poser:]

And in the south did you see - I mean, did spring kick in well in your southern - in more southern stores earlier. I mean, did you feel happy with that business or was it still tough?

[Clifton Sifford:]

In actuality our comps in the - for spring product was better in the north for the first quarter than it was in the south. And the reason for that is that it was really cold in the first quarter for last year and it was warmer this year once the snows moved out of the Midwest. And so we were going to get easier comparisons in the north than we were in the south.

[Sam Poser:]

All right, well…

[Clifton Sifford:]

Even volume was greater in the south, but the comp increases were greater in the north.

[Sam Poser:]

And have you seen, I mean, when you’re looking at this significant increase that you have so far, have you seen it follow that same path or is it more balanced out now that we’re really in season.

[Clifton Sifford:]

One that you - once you get to a consistent warm weather across all categories for both years - across all geographic regions for both years, it balances out.

[Sam Poser:]

Okay. Thank you very much. Good luck guys.

[Operator:]

We’ll go next to Scott Krasik with Buckingham.

[Scott Krasik:]

Yes, hi, everyone. Thanks and good quarter.

[Clifton Sifford:]

Hey, thanks, Scott.

[Scott Krasik:]

So just going back, I guess, I was confused when you spoke last quarter. I’m just trying to parse out what happened on the call, because I wasn’t expecting February to be down five based on your comment. So, I mean, if you could go back, were you positive when you reported last quarter. And I just re-read the transcript.

[Clifton Sifford:]

I wouldn’t have to read my transcript again, but I think I actually said that February was down five, and that we were negative, we were actually negative that the time of the call but I felt like that the recent change in our business due to the warmer weather that we would end the quarter with low to - with flat to low single digit comps, I believe that’s what I said. Kerry is looking it up right now.

[Scott Krasik:]

Yes, it was a little bit confusing, but then - so then you gave us marbles [ph]. Can you just - just to make it a little easy, I mean, was April negative or was…?

[Clifton Sifford:]

Well, March, you got to remember now that Easter moved to the first week of April, so most of the Easter’s business happened in the month of March, in fact, all of Easter’s business happened in the month of March. So our business in March was up in the 30s, but that’s because all our business happened during that month. And then April was negative, but that’s because Easter moved out of April. That’s the reason we say that the best way to look at this thing is to look at March and April as a combined total.

[Scott Krasik:]

That makes sense, okay.

[Clifton Sifford:]

And that was up 6.7.

[Scott Krasik:]

And then just a question you obviously have opportunity with your margin in the second quarter. But I’m curious, because you said, number one, it was, because you had your spring seasonal inventory planned better, or more in line. So I’m wondering, do you feel good that you can actually comp well with your spring seasonal goods, or is it just that you bought less of it, so the potential for markdowns is less?

[Clifton Sifford:]

I think, there’s two things and you picked up on one of them. We obviously bought less, because we’re on at inventory turn initiative over the next three to four years. So the inventories are not as - are going to be continue to be lower. But I’m going to also tell you that I’m really pleased with the way that the current product mix looks, and the way that we bought into key items of the season heavily, and how we’ve identified, I believe, we’ve identified the strongest sandal categories to go after. So that business is good and it’s turning well. Our sell-throughs are strong. So I’m - that’s the reason we continue to believe that our margin is going to be up.

[Scott Krasik:]

And - okay. So it really is sort of true sandal?

[Clifton Sifford:]

It’s a combination of, I guess, it’s a combination of both things that you said.

[Scott Krasik:]

Okay, okay. And then in terms of athletic, I mean, any commentary there, because you pull a lot of your canvas, it’s not actually in athletic at all right?

[Clifton Sifford:]

Yes. We - you - it’s hard for you to address, look at our athletic and compare to anyone else’s athletic, because we move a lot of different - can’t be used in a sport, then it reports to the non-athletic department. So that’s a little different than our competitors. But our athletic business is good. Our true athletic business is good. Our running business is good. Our basketball business in men’s and women’s is good. So I’m very happy with our athletic, in fact, our athletic business is running on plan.

[Scott Krasik:]

And then you obviously don’t have to go through it in detail, but any changes in your promotional plans for back-to-school year-over-year shifts earlier or later?

[Clifton Sifford:]

Other than the major shifts, and we do two things, Scott. We look at tax free, because that’s a very huge driver of large volume weeks. So if we look at tax free and we make the shifts based on when the states are going to run their tax free, then we look at every single market areas back-to-school days when we make our shifts there as well. So the natural and you look at Labor Day and when Labor Day is to see if there is any major shift there. So back-to-school is always a shifting time period year-after-year. It just happens to be a major shift this year because of tax free.

[Scott Krasik:]

Okay. And then just to the extent that you did buy summer or spring seasonal down, is there an opportunity to chase later in this even if - that was something you want to do or you want to just keep the inventory turns up?

[Clifton Sifford:]

Some of the biggest mistakes we’ve ever made as a company is, when we decided that we would chase spring goods in later in the quarter. Now those spring goods usually end up in the markdown rack in August. So we’re pretty excited about where we are. We think that we have plenty of inventory to get us through the spring season and then back-to-school and then, of course, we get to back-to-school, we want to be selling fresh merchandise.

[Scott Krasik:]

All right. Well, good luck, and nice talking to you guys.

[Clifton Sifford:]

Okay. Thank you, Scott.

[Operator:]

We’ll take our next question from Jill Nelson with Johnson Rice.

[Jill Caruthers Nelson:]

Good afternoon.

[Clifton Sifford:]

Good afternoon, Jill.

[Jill Caruthers Nelson:]

If you could just give us an update kind of, hi, just on the delays that we saw throughout the quarter port issues and what have you. If you could just kind of update us on shipments, or are they all on track now, or are we still looking maybe a month of settling out disruptions or what have you?

[Clifton Sifford:]

I think there’s still some slight delays, it’s definitely gotten better. And as our quarter moved on, it got better and better. We’ve taken all the shoes that we deliver directly from the Far East. We’ve taken them and moved them to the East Coast port. So that naturally slows things down by about six or seven days, but that was a lot better for us than the three to four weeks delay that we were experiencing out of the West Coast. So we’ve mitigated our issue by going to the East Coast, that’s number one. Number two, some of the brands are still having issues. And but the issues aren’t huge, maybe a week or 10 days. And we think that and the brands assure us that that going to mitigate by the time we get to June. So I think it’s almost over.

[Jill Caruthers Nelson:]

Okay. And then just given the women’s non-athletic initiate, kind of you’ve had a good solid group of stores in this program for kind of second year now. If you could just talk about how they are comping on top of each other in a year or two? And are you still kind of seen a 200 basis point higher comp out of their stores?

[Clifton Sifford:]

And actually, I don’t have that number in front of me, so I hesitate to give that to you directly. I will tell you that they are comping better than our storage without the better brands. So I will tell you that. And I’m very encouraged by the fact that our women’s non-athletic department for the second quarter in a row led the company in comp store increases. So it is working.

[Jill Caruthers Nelson:]

Okay. And then just last one given the drop in oil prices and what we’re hearing about Texas economy. Could you just talk about kind of how Texas performed to you in the first quarter and if you think the - you felt any impact from that?

[Clifton Sifford:]

And actually we’ve been following Texas. We hear buzz about the fact that Texas businesses could get tough. But our business in Texas as a whole is not been widely effective.

[Jill Caruthers Nelson:]

All right. Thank you so much.

[Clifton Sifford:]

I’m not going to tell you, there’s not pockets of Texas that haven’t - that Texas as a whole has been good for us.

[Jill Caruthers Nelson:]

All right. Thank you.

[Operator:]

[Operator Instructions] We’ll go next to Chris Svezia with Susquehanna Financial Group.

[Chris Svezia:]

Good afternoon, everyone.

[Clifton Sifford:]

Hey, good afternoon, Chris.

[Chris Svezia:]

Hey. So I just want to go back to Scott’s earlier first question just, could you just maybe, I don’t know if Kerry would be able to take it up. But I think remember Cliff, you’re commenting that comps were strong initially in the first quarter than weakened, I think mid-February into early March. And then I think as when you report the numbers you’ve commented that business suddenly start to accelerate, I think that week or something on those lines. So where you at that point exactly…

[Clifton Sifford:]

That’s exactly what I said. That’s exactly right. The first week of February was incredibly strong just like the last week of January was. And as we moved the second week of February was good, but not like the first. The third week of February and the fourth week of February, first week of March, I really don’t like getting down to the week-to-week business. But since in mentioned it in the first quarter call, I guess, I have to beyond work, not just fab, they were awful. That was the three weeks where we lost 400 store close dates. We actually ended up February down 5%, and I believe, Kerry is looking at transcript now. I believe - I truly believe, I said either in a question or answer in the script that we were actually negative going into that call. But we’re slightly negative I might have said or close to flat.

[Chris Svezia:]

Okay. So on the top?

[Clifton Sifford:]

We felt that with the current trend at the time of our call the things were going to be better and we were going to end the quarter with flat to up low.

[Chris Svezia:]

Okay. So at the time of the call you were down fair to say that in low single digits in aggregate so for quarter to-date, is that a fair assessment?

[Clifton Sifford:]

We were just like - I think we were slightly down.

[Kerry Jackson:]

It was closer to break-even than anything else, but it was slightly down.

[Chris Svezia:]

Okay, at that time, okay. Okay, then what - I’m curious what - when you talk about traffic, I’m just curious what do you, I’m sure it’s your compelling product assortment, but I’m just curious, what do you think is driving it? Is it what you’re doing on your perks? Is it the advertising, what’s driving the traffic to your stores specifically?

[Clifton Sifford:]

I think it’s a combination, I personally believe there’s combination of our advertising, of our Shoe Perks which is not just national. Okay. It’s what we do digitally. It’s what we do to our Shoe Perks members and the fact that over the past two-and-a-half years we have added almost 6 million, and I think I’m right on that, 6 million new members, which gives us 6 million new e-mail addresses to market to. So you got to take that into consideration. And then our online presence - our online presence has helped our business. The fact that - once we went to ship from store last year and our business escalated at the rate it did, you got to know who we were. And had a bulk product from us, and they had good service and good experience, and they came into our stores afterwards. So I believe it’s a combination of all of that.

[Chris Svezia:]

Okay. When you think about - I just want to focus a second on this tax-free holiday. When you think about this $7 million shift out of Q2 and into Q3, call it 100 to 200 basis points roughly on the comp. I just assume, all else being equal, Q3 clearly benefits from that, all else being equal, correct?

[Clifton Sifford:]

No question about it.

[Chris Svezia:]

Okay. So then not to dig too deep into the weeds here, but Q3, well, it seems like Q2 is going to have that merchandise margin benefit, just given the two-year trend. Q3 maybe not as much, but it seems like the inventory trend-line, the growth in the women’s business could still drive product margin improvement, coupled with potentially better leverage, because you can get a much stronger comp because of that shift and the timing of that shift. Is that fair? I’m not asking specific numbers, but I’m just…

[Clifton Sifford:]

You definitely could. August should be - August should get the benefit of that shift.

[Chris Svezia:]

Okay.

[Clifton Sifford:]

If you remember our last year’s comps, I think we talked about this on the call. Is that we had - our August numbers were slightly up. Our September and October numbers were very strong. But the reason our September and October numbers were very strong is because weather cooperated 100%, had a coolish September and a coolish October, and we launched our boot products very successfully. So we - you tell me how - if I can figure out exactly what the weather patterns are going to be like September and October, I can give you a better answer.

[Chris Svezia:]

Okay. What - just on product for a second, with the boot business, what did you say you’ve done in the first quarter, it’s comp positive which you said through Easter or up to Easter, I forgot what you said, you said something…

[Clifton Sifford:]

Comp positive for the quarter, it was - it was up in the thirties.

[Chris Svezia:]

So, when you step back and you think about what you’re going to do for the back-half of this year what are your just general thoughts about your learning, that just how you’re positioning in that category given the success you had last season.

[Clifton Sifford:]

I would have been disappointed had somebody not asked that question.

[Chris Svezia:]

Glad I did.

[Clifton Sifford:]

Glad you did. We still feel that we have opportunity in boots as strong as our boot business was in the second-half of the year last year. We believe that we left a little on the table and we’re planning our boots up in the high-single-digit range for second-half.

[Chris Svezia:]

Okay. And, okay, and last point here, just on the marketing aspect. I know you didn’t really start seeing the benefit from the national advertising because you weren’t tying in with a specific product catalyst or reason to shop, I guess. Can you just remind us last year when that really kicked in and I know you’re not going to tip your hat as to what you’re doing for back-to-school, but I assume you got your ducks all lined up for back to school in terms of being able to drive that traffic. So any thoughts about how you think about national advertising and the timing versus last year when that really kicked in?

[Clifton Sifford:]

We actually believe we began to kick-in in September, but we know we can actually track it for kicking-in in October.

[Chris Svezia:]

Okay. So for - I guess, what I’m trying to get is, for back-to-school this time around, you’ll be much more constructive and productive around yet the national advertising piece versus last year. I’m just trying to think about what else could drive - I’m just trying to think about traffic drivers, that’s all.

[Clifton Sifford:]

Right, we’re - we believe we have a strong marketing plan for back-to-school.

[Chris Svezia:]

Okay.

[Clifton Sifford:]

I really don’t want to go any further than that.

[Chris Svezia:]

Okay. Just one more thing just on the canvas, everyone always seems to talking about canvas. So I’m just curious your comfort level with sustainability in that category as we kind of continue to move forward there?

[Kerry Jackson:]

Chris, they get stronger and stronger every month. So we haven’t seen any slowdown at all, sustainability definitely through this year.

[Chris Svezia:]

Okay. All right. That’s all I have. All the best. Thanks, guys.

[Kerry Jackson:]

All right. Thanks Chris.

[Operator:]

Your next is Sam Poser with Sterne Agee.

[Sam Poser:]

A quick follow-up to Chris’s question. I mean, are you - have you - are we finding that the - are you finding that probably the sandal business theoretically could go through at the beginning of September, you could flow in boots that in boots run through - boots generally can run through February and March, which means these seasons are all getting a little bit longer and overlap differently and that’s going to - are you going to - how do you go about planning your business, if I’m correct about that, how do you go about planning your business not to get caught, I guess. I mean, am I thinking about it right? Because it sounds like that way….

[Clifton Sifford:]

Definitely - you’re definitely thinking about it correctly. The sandal business does expand into, at least, through the back-to-school season. And the boot business, I think by telling you what it might come throughout the first or expanded into the first quarter of this year. So I personally believe that we’ll continue to show comp increases in boots through the rest of this year. And as far as not getting call, this is all based on the inventory control and you got to be a pretty good student of the business and say, okay, this is number of pair we can sell them, so this is all we are going to buy. And that’s basically, that’s just retail one as you know.

[Sam Poser:]

No, no, I understand. Well, I guess, my point is though that the point is that can you make the business - can you extend the seasons and just say okay, we used to take our markdowns in boots in January. Now, we’re going to take - we’re going to markdown some, but we’re going to keep it fresh thing rolling and just plan on extending the seasons of both boots - of the more seasonal product, because it seems like everything seems to be stretching out a little bit. I don’t think that’s all done by managing inventory, but [Multiple Speakers]

[Clifton Sifford:]

Yes. We have been doing that and we will continue to do that. The customer buys closer and closer to need. And it’s 100 degrees when they go back-to-school. They’re probably going to be looking for canvas and sandals. So we don’t - there’s no real estate deep, deep, deep markdown for that time period.

[Sam Poser:]

If I can ask you a brand specific question, I mean, where does skechers fit into where you - is it living in women’s skechers, that mostly living in women’s non-athletic?

[Clifton Sifford:]

It lives across all departments.

[Sam Poser:]

Thank you.

[Clifton Sifford:]

Every department.

[Sam Poser:]

Distinct…

[Clifton Sifford:]

Well, let me at this way. You said women skechers or skechers in total?

[Sam Poser:]

Women skechers in total?

[Clifton Sifford:]

Women skechers resides both in the women’s non-athletic department and in the women’s athletic department.

[Sam Poser:]

But the majority of it’s in the women’s non-athletic, I would believe based on the way you mix product, because not much of it is absolute performance product?

[Clifton Sifford:]

I would believe you are not correct.

[Sam Poser:]

So you put walking in athletic or not in athletic?

[Clifton Sifford:]

No, if it can be used as a sport, in a sport, it’s in athletic. If it can’t be used in a sport, it resides in women’s.

[Sam Poser:]

All right. This is going to take too long. Thank you for the sort of clarification.

[Clifton Sifford:]

Thank you, Sam.

[Operator:]

That concludes today’s question-and-answer session. At this time, I will turn the conference back to Mr. Clifton Sifford for any final or additional remarks.

[Clifton Sifford:]

Okay. In closing, I want to thank our entire Shoe Carnival team who worked hard to deliver great product mix, excellent customer service, which led to our record first quarter sales. And I want to thank you for joining us today and we look forward to speaking to you about our second quarter results on our next call in August.

[Operator:]

This concludes today’s conference. Thank you for your participation.