Shoe Carnival Retraces Its Steps

The festive atmosphere is on hold for now at Shoe Carnival (Nasdaq: SCVL  ) .

Investors have stomped the share price down nearly 60% in the past year, and fourth-quarter results were no consolation.

Fourth-quarter sales continued a gloomy slide, slipping 1%, adjusted for the extra week in 2006. Comparable-store sales were down 5.7%.

The only cheer in sight was that the company managed to record EPS that was a little better than expected -- $0.09 versus consensus expectations of $0.07. Small consolation in my book, compared to the $0.37 per share they earned last year. But investors seemed to take heart from it, giving the stock a healthy boost in early trading.

I have to give management credit for keeping inventories in line, up 2.1% on 7% more stores. This inventory discipline allowed management to post merchandise margins equal to last year's on a rate basis. But expense deleverage on the bleak sales drove operating income 80% down from the previous year's levels.

No one in the value-shoe category is on much of a spree these days. Collective Brands (NYSE: PSS  )  and Foot Locker (NYSE: FL  ) are feeling the pain as well, reporting Q4 comps that slid even lower. It seems that companies from Brown Shoe (NYSE: BWS  ) to DSW (NYSE: DSW  ) are down more than 50% in the last year.

A situation like this might lead Foolish investors to think the stocks are in the bargain bin, and from a price perspective they look it. But remember, earnings in this sector are about half what they were last year, and sales continue a forlorn trend.

I've considered DSW the prime player in the value-shoe segment. Trading similar to Shoe Carnival at 11 times training earnings, I'd say DSW fits a bit more comfortably with its strong management team and significant potential for growth.

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Related Tickers

7/22/2014 4:00 PM
DSW $27.66 Up +0.01 +0.04%
DSW, Inc. CAPS Rating: ****
SCVL $18.27 Down -0.21 -1.14%
Shoe Carnival, Inc… CAPS Rating: ***
BWS $28.23 Up +0.11 +0.39%
Brown Shoe Company… CAPS Rating: **
FL $48.07 Down -0.41 -0.85%
Foot Locker, Inc CAPS Rating: ***
PSS $0.00 Down +0.00 +0.00%
Collective Brands… CAPS Rating: **

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