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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

10/20/2016 4:01 PM
DSW $21.15 Up +0.05 +0.24%
DSW CAPS Rating: ****
SCVL $26.05 Down -0.05 -0.19%
Shoe Carnival CAPS Rating: ***
CAL $25.64 Down -0.05 -0.19%
Caleres CAPS Rating: ***
FL $68.02 Down -0.10 -0.15%
Foot Locker CAPS Rating: ***
PSS.DL $0.00 Down +0.00 +0.00%
Collective Brands CAPS Rating: No stars