It's evident this summer hasn't been the best time to be in the business of selling shoes, or to be a shareholder of a shoe business. Foot Locker (NYSE:FL) just got stomped on by second-quarter earnings. And shares of Finish Line (NASDAQ:FINL) and Collective Brands (NYSE:PSS) are down 60% and 22% for the year, respectively. Yesterday, Shoe Carnival (NYSE:SCVL) reported a weak Q2 which echoed the adversity experienced by many of its peers during the quarter. The news pushed its price further downward, as the stock tumbled more than 7%.
Among the positive takeaways for shareholders were a 5.4% increase in net sales versus the year-ago quarter, and share repurchases totaling $18.9 million. Unfortunately, the sentiment conveyed by management as well as negative trends conveyed by the numbers themselves outweighed the positives for Shoe Carnival.
It would be difficult to explain away the 7.1% drop in comparable-store sales. In the interest of transparency, management owned up to the challenging retail environment it has been facing in the form of a decrease in consumer traffic. Also dragging on shares was a gross profit margin that decreased 180 basis points during the second quarter of 2006, and selling, general and administrative (SG&A) expenses that ate up the remainder of the company's profits. The retailer reported EPS of $0.01, versus EPS of $0.21 in the year-ago quarter.
While each of these shoe retailers trade at significantly cheaper prices than, say, two months ago, the downward trend experienced by such a large portion of the industry remains troubling. Shoe Carnival plans to add a total of 25 new stores in FY 2007 and another 30 to 40 new stores in FY 2008. Due to the current state of the economy, it's tough to decide which companies will be able to ride out the storm. So for now, I'll be sitting on the sidelines until the company can prove its comps and earnings are at least headed in the right direction.
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Fool contributor Billy Fisher does not own shares of any of the companies mentioned. The Fool has a disclosure policy.
