Bear of the Day: Shoe Carnival (SCVL)

Shoe Carnival (SCVL), a family footwear retailer in the United States, holds a Zacks Rank #5 (Strong Sell). The company sells a wide range of products, from dress and casual shoes to sandals, boots, athletic footwear, and accessories for men, women, and children.

While the stock has rebounded modestly from its April lows, shares remain down about 30% in 2025. With earnings on deck next week and analyst estimates still moving lower, investors may want to stay on the sidelines until momentum improves.

About the Company

Shoe Carnival is among the nation’s largest family footwear retailers, with more than 400 stores across 33 states and Puerto Rico, alongside a growing e-commerce presence through shoecarnival.com and shoestation.com.

Founded in 1978 and headquartered in Evansville, Indiana, the company emphasizes moderately priced footwear from national and regional name brands.

The company has a market cap of $600M and pays a dividend of 2.7%. The stock holds Zacks Style Scores of “A” in Value, but “F” in Momentum.

Q1 Earnings

Shoe Carnival stumbled in the first quarter, reporting earnings of $0.34 per share versus $0.63 a year ago, with revenue sliding to $277.7 million from $300 million. Comparable store sales fell 8.1 percent, with about one point of the decline tied to lost sales from its ongoing rebanner strategy. Margins also slipped, with gross margin narrowing to 34.5 percent from 35.6 percent last year.

The company ended the quarter with 429 stores across its Shoe Carnival, Shoe Station, and Rogan’s banners, while inventories rose to $428.4 million. Management reaffirmed full-year guidance, calling for revenue between $1.15 and $1.23 billion and EPS of $1.60 to $2.10.

Near-term profitability is being weighed down by heavy investment in converting stores to the faster-growing Shoe Station concept, which is expected to dent fiscal 2025 operating income by $20 to $25 million but deliver stronger returns over the next two to three years.

Since EPS, the stock has slowly rallied 10%, but investors should be wary ahead of earnings next week.

Earnings Estimates See Recent Drop  

Over the last 7 days, analyst estimates have taken a leg lower:

For the current quarter, estimates have fallen from $0.60 to $0.55, or 8%.

For next quarter, estimates have gone from $0.59 to $0.50, or 15%.

Longer term we see the current year's number revised 8% lower. Next year does not get better, with estimates lowered 9% over the last 7 days.

The drop before EPS is not comforting and if the company posts another miss, investors could see recent gains erased overnight.

Technical Take

The stock has dropped over 50% from the 2024 highs, so buy the dippers see a bargain. While this may be, the company has its fundamental challenges we discussed above.

Looking at the chart, there are technical challenges as well.

The 200-day MA is dropping, but is still about 15% above current prices at $24.20. Price is currently over the 50-day MA at $20.75, but if the stock gets below that area after EPS, we could see the stock move back to the summer lows at $19.

In Summary

With earnings estimates sliding, margins under pressure, and a costly store conversion strategy weighing on results, Shoe Carnival faces hurdles in the near term. While the stock looks cheap on a value basis, weak momentum and the risk of another earnings disappointment keep the outlook bearish.

Until the company proves it can stabilize comps investors are better off waiting on the sidelines.

For now, investors looking at the Apparel and Shoes industry should look at Levi Strauss (LEVI). The stock is a Zacks Rank #1 (Strong Buy) that is trading near 2025 highs.

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This article originally published on Zacks Investment Research (zacks.com).

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