Shoe Carnival (SCVL, Financial) jumped 7% today after posting strong Q2 results, with notable beats on both revenue and earnings. Although comparable sales declined by 2.1%, this was a significant improvement from the 9.4% drop last quarter, indicating positive momentum and a robust back-to-school season.
- Similar to Boot Barn Holdings (BOOT, Financial), SCVL delivered impressive Q2 results, with adjusted EPS of $0.83 and a 12.9% year-over-year revenue increase to $332.7 million, nearly doubling Q1's growth rate. While Q2 comparable store sales were negative, they turned positive during the back-to-school season, which spans from late July to Labor Day weekend.
- SCVL attributed its back-to-school comp growth to a shift in its marketing strategy. This year, the company fully transitioned from traditional TV marketing to a digital-first approach, which it had tested over the past year. This shift allowed SCVL to enhance its messaging in real-time without additional marketing costs.
- The positive impact of a strong back-to-school season is carrying into Q3. In August, SCVL saw low-single-digit comp growth, driven by mid-to-high-single-digit increases in children's and athletics categories. Both the Carnival and Station banners posted positive comps. Consequently, SCVL raised the lower end of its FY25 forecasts, now targeting adjusted EPS of $2.60-2.75 (up from $2.55-2.75), revenue of $1.23-1.25 billion (up from $1.21-1.25 billion), and comps of down 1.5% to up 1% (compared to down 3% to up 1%).
- CEO Mark Worden warned that the company is more likely to hit the lower end of its updated FY25 estimates. However, achieving record sales during the holiday season could push results toward the higher end of the guidance.
SCVL's Q2 performance suggests the company is recovering from previous quarters affected by reduced discretionary spending. While the raised worst-case outlook is encouraging, CEO Mark Worden's cautious optimism mirrors the sentiment from BOOT last month. Inflationary pressures could lead to month-to-month volatility, maintaining near-term uncertainty. Given the current stock price and a high short interest of over 10%, we advise caution in the near term.
