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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| For the quarterly period ended November 2, 2024
or
☐ |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| For the transition period from to .

Commission File Number: | 0-21360
Shoe Carnival, Inc.
(Exact name of registrant as specified in its charter)

Indiana |  | 35-1736614
(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)
7500 East Columbia Street Evansville, IN |  | 47715
(Address of principal executive offices) |  | (Zip code)

(812) 867-4034
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.01 per share |  | SCVL |  | The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer | ☒ Accelerated filer | ☐ Non-accelerated filer | ☐ Smaller reporting company | ☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Number of Shares of Common Stock, par value $0.01 per share, outstanding at December 4, 2024 was 27,174,765.

SHOE CARNIVAL, INC.

INDEX TO FORM 10-Q

|  |  | Page
Part I | Financial Information |
| Item 1. | Financial Statements (Unaudited) |
|  | Condensed Consolidated Balance Sheets | 3
|  | Condensed Consolidated Statements of Income | 4
|  | Condensed Consolidated Statements of Shareholders’ Equity | 5
|  | Condensed Consolidated Statements of Cash Flows | 6
|  | Notes to Condensed Consolidated Financial Statements | 7
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 22
| Item 4. | Controls and Procedures | 22
Part II | Other Information |
| Item 1A. | Risk Factors | 23
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23
| Item 5. | Other Information | 23
| Item 6. | Exhibits | 23
| Signature | 25

2

SHOE CARNIVAL, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHOE CARNIVAL, INC.

CONDENSED CONSOLID ATED BALANCE SHEETS

Unaudited

(In thousands, except share data) |  | November 2, 2024 |  |  | February 3, 2024 |  |  | October 28, 2023 |
Assets |  |  |  |  |  |  |  |  |
Current Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 77,235 |  |  | $ | 99,000 |  |  | $ | 59,895 |
Marketable securities |  |  | 13,866 |  |  |  | 12,247 |  |  |  | 11,226 |
Accounts receivable |  |  | 8,678 |  |  |  | 2,593 |  |  |  | 3,105 |
Merchandise inventories |  |  | 406,599 |  |  |  | 346,442 |  |  |  | 368,344 |
Other |  |  | 20,662 |  |  |  | 21,056 |  |  |  | 19,469 |
Total Current Assets |  |  | 527,040 |  |  |  | 481,338 |  |  |  | 462,039 |
Property and equipment – net |  |  | 174,171 |  |  |  | 168,613 |  |  |  | 164,982 |
Operating lease right-of-use assets |  |  | 351,023 |  |  |  | 333,851 |  |  |  | 337,833 |
Intangible assets |  |  | 40,979 |  |  |  | 32,600 |  |  |  | 32,600 |
Goodwill |  |  | 18,018 |  |  |  | 12,023 |  |  |  | 12,023 |
Other noncurrent assets |  |  | 13,198 |  |  |  | 13,600 |  |  |  | 13,995 |
Total Assets |  | $ | 1,124,429 |  |  | $ | 1,042,025 |  |  | $ | 1,023,472 |
Liabilities and Shareholders’ Equity |  |  |  |  |  |  |  |  |
Current Liabilities: |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 57,283 |  |  | $ | 58,274 |  |  | $ | 42,944 |
Accrued and other liabilities |  |  | 20,050 |  |  |  | 16,620 |  |  |  | 21,394 |
Current portion of operating lease liabilities |  |  | 58,432 |  |  |  | 52,981 |  |  |  | 57,091 |
Total Current Liabilities |  |  | 135,765 |  |  |  | 127,875 |  |  |  | 121,429 |
Long-term portion of operating lease liabilities |  |  | 317,679 |  |  |  | 301,355 |  |  |  | 305,322 |
Deferred income taxes |  |  | 17,639 |  |  |  | 17,341 |  |  |  | 16,647 |
Deferred compensation |  |  | 13,449 |  |  |  | 11,639 |  |  |  | 9,770 |
Other |  |  | 4,239 |  |  |  | 426 |  |  |  | 398 |
Total Liabilities |  |  | 488,771 |  |  |  | 458,636 |  |  |  | 453,566 |
Shareholders’ Equity: |  |  |  |  |  |  |  |  |
Common stock, $0.01 par value, 50,000,000 shares authorized and 41,049,190 shares issued in each period, respectively |  |  | 410 |  |  |  | 410 |  |  |  | 410 |
Additional paid-in capital |  |  | 87,861 |  |  |  | 83,738 |  |  |  | 82,408 |
Retained earnings |  |  | 762,489 |  |  |  | 714,647 |  |  |  | 702,434 |
Treasury stock, at cost, 13,874,425 shares, 13,919,326 shares and 13,918,470 shares, respectively |  |  | (215,102 | ) |  |  | (215,406 | ) |  |  | (215,346 | )
Total Shareholders’ Equity |  |  | 635,658 |  |  |  | 583,389 |  |  |  | 569,906 |
Total Liabilities and Shareholders’ Equity |  | $ | 1,124,429 |  |  | $ | 1,042,025 |  |  | $ | 1,023,472 |

See notes to Condensed Consolidated Financial Statements.

3

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Unaudited

(In thousands, except per share data) |  | Thirteen Weeks Ended November 2, 2024 |  |  | Thirteen Weeks Ended October 28, 2023 |  |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Net sales |  | $ | 306,885 |  |  | $ | 319,914 |  |  | $ | 939,946 |  |  | $ | 895,713 |
Cost of sales (including buying, distribution and occupancy costs) |  |  | 196,503 |  |  |  | 202,213 |  |  |  | 602,821 |  |  |  | 574,030 |
Gross profit |  |  | 110,382 |  |  |  | 117,701 |  |  |  | 337,125 |  |  |  | 321,683 |
Selling, general and administrative expenses |  |  | 85,853 |  |  |  | 89,766 |  |  |  | 260,010 |  |  |  | 248,147 |
Operating income |  |  | 24,529 |  |  |  | 27,935 |  |  |  | 77,115 |  |  |  | 73,536 |
Interest income |  |  | (1,148 | ) |  |  | (833 | ) |  |  | (2,623 | ) |  |  | (1,744 | )
Interest expense |  |  | 139 |  |  |  | 71 |  |  |  | 412 |  |  |  | 208 |
Income before income taxes |  |  | 25,538 |  |  |  | 28,697 |  |  |  | 79,326 |  |  |  | 75,072 |
Income tax expense |  |  | 6,296 |  |  |  | 6,836 |  |  |  | 20,225 |  |  |  | 17,244 |
Net income |  | $ | 19,242 |  |  | $ | 21,861 |  |  | $ | 59,101 |  |  | $ | 57,828 |
Net income per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.71 |  |  | $ | 0.80 |  |  | $ | 2.18 |  |  | $ | 2.12 |
Diluted |  | $ | 0.70 |  |  | $ | 0.80 |  |  | $ | 2.15 |  |  | $ | 2.11 |
Weighted average shares: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 27,161 |  |  |  | 27,258 |  |  |  | 27,154 |  |  |  | 27,272 |
Diluted |  |  | 27,565 |  |  |  | 27,400 |  |  |  | 27,488 |  |  |  | 27,433 |

See notes to Condensed Consolidated Financial Statements.

4

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDATED STATE MENTS OF SHAREHOLDERS’ EQUITY

Unaudited

|  | Thirteen Weeks Ended |
|  | Common Stock |  |  | Additional Paid-In |  |  | Retained |  |  | Treasury |  |  |  |
(In thousands, except per share data) |  | Issued |  |  | Treasury |  |  | Amount |  |  | Capital |  |  | Earnings |  |  | Stock |  |  | Total |
Balance at August 3, 2024 |  |  | 41,049 |  |  |  | (13,875 | ) |  | $ | 410 |  |  | $ | 86,208 |  |  | $ | 746,996 |  |  | $ | (215,119 | ) |  | $ | 618,495 |
Dividends declared ($0.135 per share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (3,749 | ) |  |  |  |  |  | (3,749 | )
Employee stock purchase plan purchases |  |  |  |  |  | 1 |  |  |  |  |  |  | 23 |  |  |  |  |  |  | 17 |  |  |  | 40 |
Stock-based compensation expense |  |  |  |  |  |  |  |  |  |  |  | 1,630 |  |  |  |  |  |  |  |  |  | 1,630 |
Net income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 19,242 |  |  |  |  |  |  | 19,242 |
Balance at November 2, 2024 |  |  | 41,049 |  |  |  | (13,874 | ) |  | $ | 410 |  |  | $ | 87,861 |  |  | $ | 762,489 |  |  | $ | (215,102 | ) |  | $ | 635,658 |
Balance at July 29, 2023 |  |  | 41,049 |  |  |  | (13,689 | ) |  | $ | 410 |  |  | $ | 81,151 |  |  | $ | 683,875 |  |  | $ | (209,917 | ) |  | $ | 555,519 |
Dividends declared ($0.12 per share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (3,302 | ) |  |  |  |  |  | (3,302 | )
Employee stock purchase plan purchases |  |  |  |  |  | 2 |  |  |  |  |  |  | 9 |  |  |  |  |  |  | 26 |  |  |  | 35 |
Purchase of common stock for treasury |  |  |  |  |  | (231 | ) |  |  |  |  |  |  |  |  |  |  |  | (5,455 | ) |  |  | (5,455 | )
Stock-based compensation expense |  |  |  |  |  |  |  |  |  |  |  | 1,248 |  |  |  |  |  |  |  |  |  | 1,248 |
Net income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 21,861 |  |  |  |  |  |  | 21,861 |
Balance at October 28, 2023 |  |  | 41,049 |  |  |  | (13,918 | ) |  | $ | 410 |  |  | $ | 82,408 |  |  | $ | 702,434 |  |  | $ | (215,346 | ) |  | $ | 569,906 |

|  | Thirty-nine Weeks Ended |
|  | Common Stock |  |  | Additional Paid-In |  |  | Retained |  |  | Treasury |  |  |  |
(In thousands, except per share data) |  | Issued |  |  | Treasury |  |  | Amount |  |  | Capital |  |  | Earnings |  |  | Stock |  |  | Total |
Balance at February 3, 2024 |  |  | 41,049 |  |  |  | (13,919 | ) |  | $ | 410 |  |  | $ | 83,738 |  |  | $ | 714,647 |  |  | $ | (215,406 | ) |  | $ | 583,389 |
Dividends declared ($0.405 per share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (11,259 | ) |  |  |  |  |  | (11,259 | )
Employee stock purchase plan purchases |  |  |  |  |  | 5 |  |  |  |  |  |  | 55 |  |  |  |  |  |  | 77 |  |  |  | 132 |
Stock-based compensation awards |  |  |  |  |  | 59 |  |  |  |  |  |  | (915 | ) |  |  |  |  |  | 915 |  |  |  | 0 |
Shares surrendered by employees to pay taxes on stock-based compensation awards |  |  |  |  |  | (19 | ) |  |  |  |  |  |  |  |  |  |  |  | (688 | ) |  |  | (688 | )
Stock-based compensation expense |  |  |  |  |  |  |  |  |  |  |  | 4,983 |  |  |  |  |  |  |  |  |  | 4,983 |
Net income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 59,101 |  |  |  |  |  |  | 59,101 |
Balance at November 2, 2024 |  |  | 41,049 |  |  |  | (13,874 | ) |  | $ | 410 |  |  | $ | 87,861 |  |  | $ | 762,489 |  |  | $ | (215,102 | ) |  | $ | 635,658 |
Balance at January 28, 2023 |  |  | 41,049 |  |  |  | (13,884 | ) |  | $ | 410 |  |  | $ | 83,423 |  |  | $ | 653,450 |  |  | $ | (211,715 | ) |  | $ | 525,568 |
Dividends declared ($0.32 per share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (8,844 | ) |  |  |  |  |  | (8,844 | )
Employee stock purchase plan purchases |  |  |  |  |  | 7 |  |  |  |  |  |  | 38 |  |  |  |  |  |  | 107 |  |  |  | 145 |
Stock-based compensation awards |  |  |  |  |  | 305 |  |  |  |  |  |  | (4,644 | ) |  |  |  |  |  | 4,644 |  |  |  | 0 |
Shares surrendered by employees to pay taxes on stock-based compensation awards |  |  |  |  |  | (115 | ) |  |  |  |  |  |  |  |  |  |  |  | (2,927 | ) |  |  | (2,927 | )
Purchase of common stock for treasury |  |  |  |  |  | (231 | ) |  |  |  |  |  |  |  |  |  |  |  | (5,455 | ) |  |  | (5,455 | )
Stock-based compensation expense |  |  |  |  |  |  |  |  |  |  |  | 3,591 |  |  |  |  |  |  |  |  |  | 3,591 |
Net income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 57,828 |  |  |  |  |  |  | 57,828 |
Balance at October 28, 2023 |  |  | 41,049 |  |  |  | (13,918 | ) |  | $ | 410 |  |  | $ | 82,408 |  |  | $ | 702,434 |  |  | $ | (215,346 | ) |  | $ | 569,906 |

See notes to Condensed Consolidated Financial Statements.

5

SHOE CARNIVAL, INC.

CONDENSED CONSOLIDAT ED STATEMENTS OF CASH FLOWS

Unaudited

(In thousands) |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Cash Flows From Operating Activities |  |  |  |  |  |
Net income |  | $ | 59,101 |  |  | $ | 57,828 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 22,762 |  |  |  | 21,193 |
Stock-based compensation |  |  | 5,204 |  |  |  | 3,548 |
(Gain) Loss on retirement and impairment of assets, net |  |  | (415 | ) |  |  | 79 |
Deferred income taxes |  |  | (676 | ) |  |  | 4,803 |
Non-cash operating lease expense |  |  | 41,790 |  |  |  | 41,853 |
Other |  |  | 1,270 |  |  |  | 305 |
Changes in operating assets and liabilities: |  |  |  |  |  |
Accounts receivable |  |  | (3,720 | ) |  |  | (53 | )
Merchandise inventories |  |  | (18,563 | ) |  |  | 22,046 |
Operating leases |  |  | (40,139 | ) |  |  | (41,888 | )
Accounts payable and accrued liabilities |  |  | (8,714 | ) |  |  | (33,473 | )
Other |  |  | 188 |  |  |  | (6,891 | )
Net cash provided by operating activities |  |  | 58,088 |  |  |  | 69,350 |
Cash Flows From Investing Activities |  |  |  |  |  |
Purchases of property and equipment |  |  | (24,778 | ) |  |  | (43,601 | )
Investments in marketable securities |  |  | (502 | ) |  |  | (71 | )
Sales of marketable securities and other |  |  | 1,406 |  |  |  | 0 |
Acquisition, net of cash acquired |  |  | (44,384 | ) |  |  | 0 |
Net cash used in investing activities |  |  | (68,258 | ) |  |  | (43,672 | )
Cash Flows From Financing Activities |  |  |  |  |  |
Proceeds from issuance of stock |  |  | 132 |  |  |  | 145 |
Dividends paid |  |  | (11,039 | ) |  |  | (8,928 | )
Purchase of common stock for treasury |  |  | 0 |  |  |  | (5,445 | )
Shares surrendered by employees to pay taxes on stock-based compensation awards |  |  | (688 | ) |  |  | (2,927 | )
Net cash used in financing activities |  |  | (11,595 | ) |  |  | (17,155 | )
Net (decrease) increase in cash and cash equivalents |  |  | (21,765 | ) |  |  | 8,523 |
Cash and cash equivalents at beginning of period |  |  | 99,000 |  |  |  | 51,372 |
Cash and cash equivalents at end of period |  | $ | 77,235 |  |  | $ | 59,895 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |
Cash paid during period for interest |  | $ | 212 |  |  | $ | 208 |
Cash paid during period for income taxes |  | $ | 19,007 |  |  | $ | 13,566 |
Capital expenditures incurred but not yet paid |  | $ | 3,201 |  |  | $ | 2,191 |
Dividends declared but not yet paid |  | $ | 499 |  |  | $ | 233 |
Contingent consideration related to business acquisition |  | $ | 3,600 |  |  | $ | 0 |

See notes to Condensed Consolidated Financial Statements.

6

SHOE CARNIVAL, INC.

NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS

Unaudited

Note 1 – Basis of Presentation

Shoe Carnival, Inc. is one of the nation’s largest omnichannel family footwear retailers, selling footwear and related products through our retail stores located in 36 states within the continental United States and in Puerto Rico, as well as through our e-commerce sales channels. We offer customers a broad assortment of primarily branded dress and casual shoes, sandals, boots and athletic footwear and accessories for men, women and children with an emphasis on national name brands through our Shoe Carnival and Shoe Station banners. We are an Indiana corporation that was initially formed in Delaware in 1993 and reincorporated in Indiana in 1996. References to “we,” “us,” “our” and the “Company” in this Quarterly Report on Form 10-Q refer to Shoe Carnival, Inc. and its subsidiaries.

Our consolidated financial statements include the accounts of Shoe Carnival, Inc. and its wholly-owned subsidiaries Rogan Shoes, Incorporated, SCHC, Inc. and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned subsidiary of SCHC, Inc. All intercompany accounts and transactions have been eliminated. In our opinion, the accompanying unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and contain all normal recurring adjustments necessary to fairly present our financial position and the results of our operations and our cash flows for the periods presented. Certain information and disclosures normally included in the notes to Condensed Consolidated Financial Statements have been condensed or omitted as permitted by the rules and regulations of the SEC although we believe that the disclosures are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024.

Note 2 - Acquisition of Rogan Shoes

On February 13, 2 024, we acquired all of the stock of Rogan Shoes, Incorporated, a privately-held 53-year-old work and family footwear company incorporated in Wisconsin (“Rogan’s”), for an adjusted purchase price of $44.8 million, net of $2.2 million of cash acquired, which was paid with cash on hand. This included $378,000 of purchase accounting adjustments which were paid in November 2024. Additional consideration of up to $5.0 million may be paid by the Company subject to the achievement of three-year performance targets. At the time of the acquisition, Rogan’s operated 28 store locations in Wisconsin, Minnesota and Illinois. The Rogan’s acquisition advanced our strategy to be the nation’s leading family footwear retailer. It immediately positioned us as the market leader in Wisconsin, and it established a store base in Minnesota, creating additional expansion opportunities. Rogan’s is being integrated into our Shoe Station banner and our current plan is to brand and operate these stores over time using both the Rogan’s and Shoe Station trade names.

Rogan’s results were included in our consolidated financial statements since the acquisition date. Net Sales from our newly acquired Rogan’s operations totaled $22.3 million in the thirteen weeks ended November 2, 2024 and $63.9 million from February 13, 2024 through November 2, 2024. For the thirteen and thirty-nine weeks ended November 2, 2024, acquisition-related costs of $121,000 and $539,000, respectively, were expensed as incurred and were included in Selling, General and Administrative Expenses. We also recognized a $2.6 million goodwill measurement period adjustment related to adjusting our deferred income tax positions during third quarter 2024.

The following table summarizes the purchase price and the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed. We measured these fair values using Level 3 inputs. The excess purchase price over the fair value of net assets acquired was allocated to Goodwill.

7

(In thousands) |  |  |
Purchase price: |  |  |
Cash consideration, net of cash acquired |  | $ | 44,762 |
Fair value of contingent consideration |  |  | 3,600 |
Total purchase price |  | $ | 48,362 |
Fair value of identifiable assets and liabilities: |  |  |
Accounts receivable |  | $ | 2,365 |
Merchandise inventories |  |  | 42,340 |
Other assets |  |  | 2,000 |
Operating lease right-of-use assets |  |  | 16,891 |
Identifiable intangible assets |  |  | 8,400 |
Goodwill |  |  | 5,994 |
Total assets |  | $ | 77,990 |
Accounts payable |  |  | 6,308 |
Operating lease liabilities |  |  | 19,843 |
Deferred income taxes |  |  | 974 |
Accrued and other liabilities |  |  | 2,503 |
Total liabilities |  | $ | 29,628 |
Total fair value allocation of purchase price |  | $ | 48,362 |

Our fair value estimate of the Merchandise Inventories for Rogan’s was determined using the Comparative Sales and Replacement Cost methods. Our fair value estimate of the contingent consideration for the Rogan’s acquisition was determined using a Monte Carlo simulation and other methods that account for the probabilities of various outcomes and was recorded in Other long-term liabilities. Significant assumptions used for the valuation include the discount rate, projected cash flows and calculated volatility. Our fair value estimate related to the identified intangible asset of Rogan’s trade name was determined using the Relief from Royalty method, and the significant assumptions used for the valuation include the royalty rate, estimated projected revenues, long-term growth rate and the discount rate. Our fair value estimates related to Rogan’s customer relationships were determined using the Multi-Period Excess Earnings method, and the significant assumptions used for the valuation include projected cash flows, the discount rate and customer attrition rate.

Identifiable intangible assets include Rogan’s trade name and customer relationships. We assigned an indefinite life to Rogan’s trade name; therefore, Goodwill and Rogan’s trade name will be charged to expense only if impaired. Impairment reviews will be conducted at least annually and involve a comparison of fair value to the carrying amount. If fair value is less than the carrying amount, an impairment loss would be recognized in Selling, General and Administrative Expenses. Customer relationships are subject to amortization and will be amortized over a period of 20 years. Goodwill and the acquisition-related Intangible Assets will not be deductible for tax purposes.

Note 3 - Net Income Per Share

The following table sets forth the computation of Basic and Diluted Net Income per Share as shown on the face of the accompanying Condensed Consolidated Statements of Income:

|  | Thirteen Weeks Ended |
|  | November 2, 2024 |  |  | October 28, 2023 |
|  |  |  |  | (In thousands, except per share data) |  |  |  |
Basic Net Income per Share: |  | Net Income |  |  | Shares |  |  | Per Share Amount |  |  | Net Income |  |  | Shares |  |  | Per Share Amount |
Net income available for basic common shares and basic net income per share |  | $ | 19,242 |  |  |  | 27,161 |  |  | $ | 0.71 |  |  | $ | 21,861 |  |  |  | 27,258 |  |  | $ | 0.80 |
Diluted Net Income per Share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 19,242 |  |  |  |  |  |  |  |  | $ | 21,861 |  |  |  |  |  |  |
Conversion of stock-based compensation arrangements |  |  | 0 |  |  |  | 404 |  |  |  |  |  |  | 0 |  |  |  | 142 |  |  |  |
Net income available for diluted common shares and diluted net income per share |  | $ | 19,242 |  |  |  | 27,565 |  |  | $ | 0.70 |  |  | $ | 21,861 |  |  |  | 27,400 |  |  | $ | 0.80 |

8

|  | Thirty-nine Weeks Ended |
|  | November 2, 2024 |  |  | October 28, 2023 |
|  |  |  |  | (In thousands, except per share data) |  |  |  |
Basic Net Income per Share: |  | Net Income |  |  | Shares |  |  | Per Share Amount |  |  | Net Income |  |  | Shares |  |  | Per Share Amount |
Net income available for basic common shares and basic net income per share |  | $ | 59,101 |  |  |  | 27,154 |  |  | $ | 2.18 |  |  | $ | 57,828 |  |  |  | 27,272 |  |  | $ | 2.12 |
Diluted Net Income per Share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 59,101 |  |  |  |  |  |  |  |  | $ | 57,828 |  |  |  |  |  |  |
Conversion of stock-based compensation arrangements |  |  | 0 |  |  |  | 334 |  |  |  |  |  |  | 0 |  |  |  | 161 |  |  |  |
Net income available for diluted common shares and diluted net income per share |  | $ | 59,101 |  |  |  | 27,488 |  |  | $ | 2.15 |  |  | $ | 57,828 |  |  |  | 27,433 |  |  | $ | 2.11 |

The computation of Basic Net Income per Share is based on the weighted average number of common shares outstanding during the period. The computation of Diluted Net Income per Share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units. No u nvested stock-based awards that will be settled in shares were excluded from the computation of Diluted Net Income per Share for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023.

Note 4 - Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance updates reportable segment disclosure requirements, primarily through increased disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in the ASU will be applied retrospectively to all prior periods presented in the financial statements, using the significant segment expense categories identified and disclosed in the period of adoption. We are continuing to evaluate the impact of this new guidance but believe the adoption will not have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted. We are continuing to evaluate the impact of this new guidance, but believe the adoption will not have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted. We are evaluating the impact of this new guidance, but believe the adoption will not have a material impact on our consolidated financial statements.

9

Note 5 - Fair Value Measurements

Financial Instruments

The following table presents financial instruments that are measured at fair value on a recurring basis at November 2, 2024, February 3, 2024 and October 28, 2023:

|  | Fair Value Measurements |
(In thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
As of November 2, 2024 |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents - money market mutual funds |  | $ | 65,529 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 65,529 |
Marketable securities - mutual funds that fund deferred compensation |  |  | 13,866 |  |  |  | 0 |  |  |  | 0 |  |  |  | 13,866 |
Total |  | $ | 79,395 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 79,395 |
As of February 3, 2024 |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents - money market mutual funds |  | $ | 91,733 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 91,733 |
Marketable securities - mutual funds that fund deferred compensation |  |  | 12,247 |  |  |  |  |  |  |  |  |  | 12,247 |
Total |  | $ | 103,980 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 103,980 |
As of October 28, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents - money market mutual funds |  | $ | 53,275 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 53,275 |
Marketable securities - mutual funds that fund deferred compensation |  |  | 11,226 |  |  |  |  |  |  |  |  |  | 11,226 |
Total |  | $ | 64,501 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 64,501 |

We invest in publicly traded mutual funds with readily determinable fair values. These Marketable Securities are designed to mitigate volatility in our Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of November 2, 2024, these Marketable Securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. To the extent there is a variation in invested funds compared to the total non-qualified deferred compensation plan liability, such fund variance is managed through a stable value mutual fund. We classify these Marketable Securities as current assets because we have the ability to convert the securities into cash at our discretion and these Marketable Securities are not held in a rabbi trust. Changes in these Marketable Securities and deferred compensation plan liabilities are charged to Selling, General and Administrative Expenses.

Deferred Compensation Plan Liabilities and Related Marketable Securities

The following tables present the balances and activity of the Company’s deferred compensation plan liabilities and related Marketable Securities:

(In thousands) |  | November 2, 2024 |  |  | February 3, 2024 |  |  | October 28, 2023 |
Deferred compensation plan current liabilities |  | $ | 193 |  |  | $ | 114 |  |  | $ | 1,619 |
Deferred compensation plan long-term liabilities |  |  | 13,449 |  |  |  | 11,639 |  |  |  | 9,770 |
Total deferred compensation plan liabilities |  | $ | 13,642 |  |  | $ | 11,753 |  |  | $ | 11,389 |
Marketable securities - mutual funds that fund deferred compensation |  | $ | 13,866 |  |  | $ | 12,247 |  |  | $ | 11,226 |

(In thousands) |  | Thirteen Weeks Ended November 2, 2024 |  |  | Thirteen Weeks Ended October 28, 2023 |  |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Deferred compensation liabilities |  |  |  |  |  |  |  |  |  |  |  |
Employer contributions, net |  | $ | 83 |  |  | $ | 62 |  |  | $ | 234 |  |  | $ | 233 |
Investment earnings (losses) |  |  | 632 |  |  |  | (1,031 | ) |  |  | 1,214 |  |  |  | (375 | )
Marketable Securities |  |  |  |  |  |  |  |  |  |  |  |
Mark-to-market (gains) losses (1) |  |  | (585 | ) |  |  | 993 |  |  |  | (1,169 | ) |  |  | 376 |
Net deferred compensation expense |  | $ | 130 |  |  | $ | 24 |  |  | $ | 279 |  |  | $ | 234 |

(1) Included in the mark-to-market activity related to equity securities still held at quarter-end, we recognized an unrealized gain of $568,000 and an unrealized loss of $919,000 for the thirteen weeks ended November 2, 2024 and October 28, 2023, respectively, and unrealized gains of $1,118,000 and $141,000 for the thirty-nine weeks ended November 2, 2024 and October 28, 2023, respectively.

10

The fair values of Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued and Other Liabilities approximate their carrying values because of their short-term nature.

Long-Lived Asset Impairment Testing

We periodically evaluate our long-lived assets for impairment if events or circumstances indicate that the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. Store level asset groupings typically include Property and Equipment and Operating Lease Right-of-Use Assets, net of the current and long-term portions of Operating Lease Liabilities. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in Selling, General and Administrative Expenses. If the Operating Lease Right-of-Use Asset is impaired, we would amortize the remaining right-of-use asset on a straight-line basis over the remaining lease term. No impairment charges were recorded during the thirty-nine weeks ended November 2, 2024 or the thirty-nine weeks ended October 28, 2023.

Note 6 - Stock-Based Compensation

On June 20, 2023, our shareholders approved the Shoe Carnival, Inc. Amended and Restated 2017 Equity Incentive Plan (the “Amended 2017 Plan”). Pursuant to the amendment and restatement, the number of shares of our common stock that are available for issuance under the Amended 2017 Plan was increased by 1.8 million additional shares, the term of the plan was extended by an additional ten years from the date of shareholder approval, and certain other design changes were made to the plan. As of November 2, 2024, there were 1,703,287 sh ares available for issuance under the Amended 2017 Plan, assuming that all outstanding performance stock units where the performance condition has not been satisfied vest at the maximum level of performance.

Stock-based compensation includes share-settled awards issued pursuant to the Amended 2017 Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights. For the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023, stock-based compensation expense was comprised of the following:

(In thousands) |  | Thirteen Weeks Ended November 2, 2024 |  |  | Thirteen Weeks Ended October 28, 2023 |  |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Share-settled equity awards |  | $ | 1,623 |  |  | $ | 1,242 |  |  | $ | 4,926 |  |  | $ | 3,566 |
Stock appreciation rights |  |  | 0 |  |  |  | (26 | ) |  |  | 221 |  |  |  | (43 | )
Employee stock purchase plan |  |  | 7 |  |  |  | 6 |  |  |  | 57 |  |  |  | 25 |
Total stock-based compensation expense |  | $ | 1,630 |  |  | $ | 1,222 |  |  | $ | 5,204 |  |  | $ | 3,548 |
Income tax effect at statutory rates |  | $ | (397 | ) |  | $ | (341 | ) |  | $ | (1,266 | ) |  | $ | (863 | )
Additional income tax benefit on vesting of share-settled awards |  | $ | 0 |  |  | $ | (1 | ) |  | $ | (109 | ) |  | $ | (617 | )

As of November 2, 2024, approximately $9.2 million of unrecognized compensation expense remained related to our share-settled equity awards. The cost is expected to be recognized over a weighted average period of approximately 1.4 years.

11

Share-Settled Equity Awards

The following table summarizes transactions for our restricted stock units and performance stock units:

|  | Number of Shares |  |  | Weighted- Average Grant Date Fair Value |
Outstanding at February 3, 2024 |  |  | 579,307 |  |  | $ | 27.04 |
Granted |  |  | 338,773 |  |  |  | 32.06 |
Vested |  |  | (46,333 | ) |  |  | 30.17 |
Forfeited/Unearned |  |  | (164,087 | ) |  |  | 24.98 |
Outstanding at November 2, 2024 |  |  | 707,660 |  |  | $ | 29.72 |

The total fair value at grant date of restricted stock units and performance stock units that vested during the thirty-nine weeks ended November 2, 2024 and October 28, 2023 was $1.4 million and $4.8 million, respectively. The weighted-average grant date fair value of restricted stock units and performance stock units granted during the thirty-nine weeks ended October 28, 2023 was $24.98. There were 159,954 shares that were not earned because the performance condition for performance stock units granted in Fiscal 2023 was not satisfied.

The following table summarizes transactions for our restricted stock and other stock awards:

|  | Number of Shares |  |  | Weighted- Average Grant Date Fair Value |
Outstanding at February 3, 2024 |  |  | 0 |  |  | $ | 0.00 |
Granted |  |  | 12,760 |  |  |  | 36.84 |
Vested |  |  | 0 |  |  |  | 0.00 |
Forfeited |  |  | 0 |  |  |  | 0.00 |
Outstanding at November 2, 2024 |  |  | 12,760 |  |  | $ | 36.84 |

No restricted stock or other stock awards vested during the thirty-nine weeks ended November 2, 2024 or October 28, 2023. The weighted average grant date fair value of restricted stock awards granted during the thirty-nine weeks ended October 28, 2023 was $21.90.

Note 7 – Revenue

Disaggregation of Net Sales by Product Category

Net Sales and percentage of Net Sales, disaggregated by product category, for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023 were as follows:

(In thousands) |  | Thirteen Weeks Ended November 2, 2024 |  |  | Thirteen Weeks Ended October 28, 2023 |
Non-Athletics: |  |  |  |  |  |  |  |  |  |  |  |
Women’s |  | $ | 65,008 |  |  |  | 21 | % |  | $ | 72,850 |  |  |  | 23 | %
Men’s |  |  | 52,180 |  |  |  | 17 |  |  |  | 47,324 |  |  |  | 15 |
Children’s |  |  | 19,963 |  |  |  | 6 |  |  |  | 23,954 |  |  |  | 7 |
Total |  |  | 137,151 |  |  |  | 44 |  |  |  | 144,128 |  |  |  | 45 |
Athletics: |  |  |  |  |  |  |  |  |  |  |  |
Women’s |  |  | 51,005 |  |  |  | 17 |  |  |  | 48,642 |  |  |  | 15 |
Men’s |  |  | 53,599 |  |  |  | 17 |  |  |  | 54,148 |  |  |  | 17 |
Children’s |  |  | 46,202 |  |  |  | 15 |  |  |  | 53,009 |  |  |  | 17 |
Total |  |  | 150,806 |  |  |  | 49 |  |  |  | 155,799 |  |  |  | 49 |
Accessories |  |  | 17,346 |  |  |  | 6 |  |  |  | 18,295 |  |  |  | 6 |
Other |  |  | 1,582 |  |  |  | 1 |  |  |  | 1,692 |  |  |  | 0 |
Total |  | $ | 306,885 |  |  |  | 100 | % |  | $ | 319,914 |  |  |  | 100 | %

12

(In thousands) |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Non-Athletics: |  |  |  |  |  |  |  |  |  |  |  |
Women’s |  | $ | 226,821 |  |  |  | 24 | % |  | $ | 233,355 |  |  |  | 26 | %
Men’s |  |  | 160,036 |  |  |  | 17 |  |  |  | 142,420 |  |  |  | 16 |
Children’s |  |  | 64,602 |  |  |  | 7 |  |  |  | 67,800 |  |  |  | 8 |
Total |  |  | 451,459 |  |  |  | 48 |  |  |  | 443,575 |  |  |  | 50 |
Athletics: |  |  |  |  |  |  |  |  |  |  |  |
Women’s |  |  | 150,836 |  |  |  | 16 |  |  |  | 132,028 |  |  |  | 15 |
Men’s |  |  | 162,384 |  |  |  | 17 |  |  |  | 151,280 |  |  |  | 17 |
Children’s |  |  | 119,738 |  |  |  | 13 |  |  |  | 117,051 |  |  |  | 13 |
Total |  |  | 432,958 |  |  |  | 46 |  |  |  | 400,359 |  |  |  | 45 |
Accessories |  |  | 51,230 |  |  |  | 5 |  |  |  | 47,724 |  |  |  | 5 |
Other |  |  | 4,299 |  |  |  | 1 |  |  |  | 4,055 |  |  |  | 0 |
Total |  | $ | 939,946 |  |  |  | 100 | % |  | $ | 895,713 |  |  |  | 100 | %

Accounting Policy and Performance Obligations

We operate as an omnichannel, family footwear retailer and provide the convenience of shopping at our physical stores or shopping online through our e-commerce sales channels. As part of our omnichannel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock at a particular store. We also offer “buy online, pick up in store” services for our customers. “Buy online, pick up in store” provides the convenience of local pickup for our customers.

For our physical stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products. This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store. For sales made through our e-commerce sales channels in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped. This also includes sales made via our Shoes 2U program when the customer chooses home delivery.

We offer our customers sales incentives including coupons, discounts and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in Cost of Sales. Gift card revenue is recognized at the time of redemption. When a customer makes a purchase as part of our rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions.

Transaction Price and Payment Terms

The transaction price is the amount of consideration we expect to receive from our customers and is reduced by any stated promotional discounts at the time of purchase. The transaction price may be variable due to terms that permit customers to exchange or return products for a refund. The implicit contract with the customer reflected in the transaction receipt states the final terms of the sale, including the description, quantity, and price of each product purchased. The customer agrees to a stated price in the contract that does not vary over the term of the contract and may include revenue to offset shipping costs. Taxes imposed by governmental authorities, such as sales taxes, are excluded from Net Sales.

We accept various forms of payment from customers at the point of sale typical for an omnichannel retailer. Payments made for products are generally collected when control passes to the customer, either at the point of sale or at the time the customer order is shipped. For Shoes 2U transactions, customers may order the product at the point of sale. For these transactions, customers pay in advance and unearned revenue is recorded as a contract liability. We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer). Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at November 2, 2024, February 3, 2024 or October 28, 2023.

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Returns and Refunds

We have established an allowance based upon historical experience in order to estimate return and refund transactions. This allowance is recorded as a reduction in sales with a corresponding refund liability recorded in Accrued and Other Liabilities. The estimated cost of Merchandise Inventories is reco rded as a reduction to Cost of Sales and an increase in Merchandise Inventories. Approximately $962,000 of refund liabilities and $618,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, as of November 2, 2024 and February 3, 2024. Approximately $866,000 of refund liabilities and $503,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively, at October 28, 2023.

Contract Liabilities

The issuance of a gift card is recorded as an increase to contract liabilities and a decrease to contract liabilities when a customer redeems a gift card. Estimated breakage is determined based on historical breakage percentages and recognized as revenue based on expected gift card usage. We do not record breakage revenue when escheat liability to relevant jurisdictions exists. At November 2, 2024, February 3, 2024 and October 28, 2023, approximately $2.4 million, $2.4 million and $1.8 million of contract liabilities associated with unredeemed gift cards were recorded in Accrued and Other Liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two years. Breakage revenue associated with our gift cards recognized in Net Sales was no t material to any of the periods presented.

Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards. Points under Shoe Perks are earned primarily by making purchases through any of our omnichannel points of sale. Once a certain threshold of accumulated points is reached, the customer earns a reward certificate, which is redeemable through any of our sales channels.

When a Shoe Perks customer makes a purchase, we allocate the transaction price between the goods purchased and the loyalty reward points earned based on the relative standalone selling price. The portion allocated to the points program is recorded as a contract liability for rewards that are expected to be redeemed. We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates. During the thirteen and thirty-nine weeks ended November 2, 2024, approximately $943,000 and $2.5 million, respectively, of loyalty rewards were recognized in Net Sales. During the thirteen and thirty-nine weeks ended October 28, 2023, approximately $1.6 million and $4.3 million, respectively, of loyalty rewards were recognized in Net Sales. At November 2, 2024, February 3, 2024 and October 28, 2023, approximately $613,000, $481,000 and $956,000, respectively, of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.

Note 8 – Leases

We lease all of our physical stores, our Evansville distribution center, which has a current lease term expiring in 2034, and other warehousing and office space. We also enter into leases of equipment and other assets. Substantially all of our leases are operating leases; however, as a result of the acquisition of Rogan’s, we also acquired certain assets subject to finance leases. The finance lease assets and related current liabilities and noncurrent liabilities were recorded in Other Noncurrent Assets, Accrued and Other Liabilities and Other long-term liabilities, respectively. Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties as of November 2, 2024.

Lease costs, including other related occupancy costs, reported in our Condensed Consolidated Statements of Income were as follows for the thirteen and thirty-nine weeks ended November 2, 2024 and October 28, 2023:

(In thousands) |  | Thirteen Weeks Ended November 2, 2024 |  |  | Thirteen Weeks Ended October 28, 2023 |  |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Operating lease cost |  | $ | 17,889 |  |  | $ | 16,035 |  |  | $ | 52,375 |  |  | $ | 47,860 |
Variable lease cost |  |  |  |  |  |  |  |  |  |  |  |
Occupancy costs |  |  | 5,785 |  |  |  | 5,299 |  |  |  | 17,287 |  |  |  | 16,021 |
Percentage rent and other variable lease costs |  |  | 220 |  |  |  | 395 |  |  |  | 492 |  |  |  | 1,019 |
Finance lease cost |  |  |  |  |  |  |  |  |  |  |  |
Amortization of leased assets |  |  | 30 |  |  |  | 0 |  |  |  | 45 |  |  |  | 0 |
Interest on lease liabilities |  |  | 2 |  |  |  | 0 |  |  |  | 8 |  |  |  | 0 |
Total |  | $ | 23,926 |  |  | $ | 21,729 |  |  | $ | 70,207 |  |  | $ | 64,900 |

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Factors That May Affect Future Results

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: our ability to control costs and meet our labor needs in a rising wage, inflationary, and/or supply chain constrained environment; the impact of competition and pricing, including our ability to maintain current promotional intensity levels; the effects and duration of economic downturns and unemployment rates; our ability to achieve expected operating results from, and planned growth of, our Shoe Station banner, which includes the recently acquired stores and operations of Rogan’s, within expected time frames, or at all; the potential impact of national and international security concerns, including those caused by war and terrorism, on the retail environment; general economic conditions in the areas of the continental United States and Puerto Rico where our stores are located; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to successfully utilize the e-commerce sales channel and its impact on traffic and transactions in our physical stores; the success of the open-air shopping centers where many of our stores are located and the impact on our ability to attract customers to our stores; our ability to attract customers to our e-commerce platform and to successfully grow our omnichannel sales; the effectiveness of our inventory management, including our ability to manage key merchandise vendor relationships and direct-to-consumer initiatives; changes in our relationships with other key suppliers; changes in the political and economic environments in, the status of trade relations with, and the impact of changes in trade policies and tariffs impacting, China and other countries which are the major manufacturers of footwear; our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition; our ability to successfully manage our current real estate portfolio and leasing obligations; changes in weather, including patterns impacted by climate change; changes in consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations, including at our distribution center located in Evansville, IN; the impact of natural disasters, public health and political crises, civil unrest, and other catastrophic events on our operations and the operations of our suppliers, as well as on consumer confidence and purchasing in general; the duration and spread of a public health crisis and the mitigating efforts deployed, including the effects of government stimulus on consumer spending; risks associated with the seasonality of the retail industry; the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees, including as a result of a cybersecurity breach; our ability to effectively integrate Rogan’s, retain Rogan’s employees, and achieve the expected operating results, synergies, efficiencies and other benefits from the Rogan’s acquisition within the expected time frames, or at all; risks that the Rogan’s acquisition may disrupt our current plans and operations or negatively impact our relationship with our vendors and other suppliers; our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, our ability to identify, consummate or effectively integrate future acquisitions, our ability to implement and adapt to new technology and systems, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our business plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; an increase in the cost, or a disruption in the flow, of imported goods; the impact of regulatory changes in the United States, including minimum wage laws and regulations, and the countries where our manufacturers are located; the resolution of litigation or regulatory proceedings in which we are or may become involved; continued volatility and disruption in the capital and credit markets; future stock repurchases under our stock repurchase program and future dividend payments. For a more detailed discussion of risk factors impacting us, see the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024.

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PART I, ITEM 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 as filed with the SEC. This section of this Quarterly Report on Form 10-Q generally discusses our results for third quarter 2024 and third quarter 2023 and year-over-year comparisons between third quarter 2024 and third quarter 2023, as well as year-to-date results for, and comparisons between, the two periods.

Referred to herein, third quarter 2024 is the thirteen weeks ended November 2, 2024 and third quarter 2023 is the thirteen weeks ended October 28, 2023. Also referred to herein, year-to-date 2024 is the thirty-nine weeks ended November 2, 2024 and year-to-date 2023 is the thirty-nine weeks ended October 28, 2023.

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Overview of Our Business

Shoe Carnival, Inc. is one of the nation’s largest omnichannel family footwear retailers. On December 3, 2021, we began operating under two banners: Shoe Carnival and Shoe Station. On February 13, 2024, we furthered our acquisition strategy by acquiring all of the stock of Rogan Shoes, Incorporated (“Rogan’s”). The acquisition of Rogan’s added 28 physical stores (25 in Wisconsin, 2 in Minnesota, and 1 in Illinois) to our portfolio, positioned us as the market leader in Wisconsin and established a store base in Minnesota, creating additional expansion opportunities. As previously noted, Rogan’s is being integrated into our Shoe Station banner and our current plan is to brand and operate these stores over time using both the Rogan’s and Shoe Station trade names. More information about the acquisition of Rogan’s can be found in Note 2 — “Acquisition of Rogan Shoes” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

Our objective is to be the nation’s leading family footwear retailer. Our product assortment, whether shopping in a physical store or through our e-commerce sales channels, is primarily branded footwear and includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes. Our typical physical store carries shoes in two general categories – athletics and non-athletics with subcategories for men’s, women’s and children’s, as well as a broad range of accessories. In addition to our physical stores, through our e-commerce sales channels, customers can purchase the same assortment of merchandise in all categories of footwear with expanded options in certain instances.

Our stores under the Shoe Carnival banner combine competitive pricing with a high-energy in-store environment that encourages customer participation. Footwear in our Shoe Carnival physical stores is organized by category and brand, creating strong brand statements within the aisles. These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store. Our signage may highlight a vendor’s product offerings or sales promotions, or may highlight seasonal or lifestyle statements by grouping similar footwear from multiple vendors.

The Shoe Station banner and retail locations, including Rogan’s locations, are a complementary retail platform for us to serve a broader base of family footwear customers in both urban and suburban demographics. The Shoe Station concept targets a more affluent family footwear customer and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands. Due to the larger average size of our Shoe Station stores and the targeted, more affluent customer, these locations provide a primary destination shopping experience.

We believe our distinctive shopping experiences give us various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods.

Critical Accounting Policies

We use judgment in reporting our financial results. This judgment involves estimates based in part on our historical experience and incorporates the impact of the current general economic climate and company-specific circumstances. However, because future events and economic conditions are inherently uncertain, our actual results could differ materially from these estimates. Our accounting policies that require more significant judgments include those with respect to Merchandise Inventories, valuation of long-lived assets, valuation of Goodwill and Intangible Assets, leases and income taxes. The accounting policies that require more significant judgment are discussed in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024, and there have been no material changes to those critical accounting policies.

Results of Operations Summary Information

|  | Number of Stores |  |  | Store Square Footage |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Comparable |
|  | Beginning |  |  |  |  |  |  |  |  | Permanently |  |  | End of |  |  | Net |  |  | End |  |  | Store Net |
Quarter Ended |  | of Period |  |  | Opened |  |  | Acquired |  |  | Closed |  |  | Period |  |  | Change |  |  | of Period |  |  | Sales(1) |
May 4, 2024 |  |  | 400 |  |  |  | 2 |  |  |  | 28 |  |  |  | 0 |  |  |  | 430 |  |  |  | 377,000 |  |  |  | 4,946,000 |  |  |  | (3.4 | )%
August 3, 2024 |  |  | 430 |  |  |  | 1 |  |  | 0 |  |  |  | 1 |  |  |  | 430 |  |  |  | 2,000 |  |  |  | 4,948,000 |  |  |  | (2.1 | )%
November 2, 2024 |  |  | 430 |  |  |  | 1 |  |  | 0 |  |  |  | 0 |  |  |  | 431 |  |  |  | 28,000 |  |  |  | 4,976,000 |  |  |  | (4.1 | )%
Year-to-date |  |  | 400 |  |  |  | 4 |  |  |  | 28 |  |  |  | 1 |  |  |  | 431 |  |  |  | 407,000 |  |  |  | 4,976,000 |  |  |  | (3.2 | )%
April 29, 2023 |  |  | 397 |  |  |  | 1 |  |  |  | 0 |  |  |  | 1 |  |  |  | 397 |  |  |  | 5,000 |  |  |  | 4,510,000 |  |  |  | (11.9 | )%
July 29, 2023 |  |  | 397 |  |  |  | 2 |  |  | 0 |  |  |  | 0 |  |  |  | 399 |  |  |  | 32,000 |  |  |  | 4,542,000 |  |  |  | (6.5 | )%
October 28, 2023 |  |  | 399 |  |  |  | 2 |  |  | 0 |  |  |  | 0 |  |  |  | 401 |  |  |  | 38,000 |  |  |  | 4,580,000 |  |  |  | (7.4 | )%
Year-to-date |  |  | 397 |  |  |  | 5 |  |  |  | 0 |  |  |  | 1 |  |  |  | 401 |  |  |  | 75,000 |  |  |  | 4,580,000 |  |  |  | (8.6 | )%

16

(1)
Comparable stores Net Sales is a key performance indicator for us. Comparable stores Net Sales include stores that have been open for 13 full months after such stores’ grand opening or acquisition prior to the beginning of the period, including those stores that have been relocated, remodeled or rebannered. Therefore, stores recently opened, acquired or permanently closed are not included in comparable stores Net Sales. We generally include e-commerce sales in our comparable stores Net Sales as a result of our omnichannel retailer strategy. Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores. E-commerce sales channels associated with a physical store acquisition will not be included in comparable stores Net Sales until the initial physical stores are included. The 21 original Shoe Station stores acquired and the www.shoestation.com e-commerce site that went live in early February 2023 were included in comparable stores Net Sales calculations beginning in first quarter 2023. All Rogan’s sales (physical stores and e-commerce) are excluded from our comparable stores Net Sales.

Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Fiscal 2023 consisted of the 53 weeks ended February 3, 2023, while Fiscal 2024 consists of the 52 weeks ending February 1, 2025. The 53rd week in Fiscal 2023 caused a one-week shift in our fiscal calendar. As a result, each of our first three quarters in Fiscal 2024 is shifted one week later compared to Fiscal 2023. This one-week shift impacts our year-over-year sales comparisons when there are seasonal sales influences that fall near the respective quarter-end dates. To minimize the effect of this fiscal calendar shift on comparable stores Net Sales, our reported comparable stores Net Sales results for third quarter 2024 in this Quarterly Report on Form 10-Q and our other public disclosures compare the thirteen-week and thirty-nine week periods ended November 2, 2024 to the thirteen-week and thirty-nine week periods ended November 4, 2023. As such, changes in comparable stores Net Sales may not be consistent with changes in Net Sales reported for the fiscal period.

The following table sets forth our results of operations expressed as a percentage of Net Sales for the periods indicated:

| Thirteen Weeks Ended November 2, 2024 |  |  | Thirteen Weeks Ended October 28, 2023 |  |  | Thirty-nine Weeks Ended November 2, 2024 |  |  | Thirty-nine Weeks Ended October 28, 2023 |
Net sales |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
Cost of sales (including buying, distribution and occupancy costs) |  | 64.0 |  |  |  | 63.2 |  |  |  | 64.1 |  |  |  | 64.1 |
Gross profit |  | 36.0 |  |  |  | 36.8 |  |  |  | 35.9 |  |  |  | 35.9 |
Selling, general and administrative expenses |  | 28.0 |  |  |  | 28.1 |  |  |  | 27.7 |  |  |  | 27.7 |
Operating income |  | 8.0 |  |  |  | 8.7 |  |  |  | 8.2 |  |  |  | 8.2 |
Interest income, net |  | (0.3 | ) |  |  | (0.2 | ) |  |  | (0.2 | ) |  |  | (0.2 | )
Income tax expense |  | 2.0 |  |  |  | 2.1 |  |  |  | 2.1 |  |  |  | 1.9 |
Net income |  | 6.3 | % |  |  | 6.8 | % |  |  | 6.3 | % |  |  | 6.5 | %

Executive Summary for Third Quarter Ended November 2, 2024

During third quarter 2024, Net Sales of $306.9 million were down $13.0 million, or 4.1%, compared to third quarter 2023. Due to the calendar shift described above, an important week of the back-to-school season that was included in third quarter 2023 was moved into the second quarter in Fiscal 2024. The net effect of this shift decreased third quarter 2024 Net Sales by approximately $20 million compared to third quarter 2023. In third quarter 2024, Net Sales otherwise increased $7.0 million, or 2.2%, compared to third quarter 2023. This increase was led by Rogan’s, which was acquired on February 13, 2024 and delivered third quarter 2024 Net Sales of approximately $22.3 million, and new store growth from Shoe Station stores.

On a comparable store basis, which excludes the impact of the calendar shift, Rogan’s sales and sales from other new stores, Net Sales were down 4.1%. During third quarter 2024, our comparable stores Net Sales grew in August due to our strong back-to-school performance; however, comparable stores Net Sales declined in September and October due to the impact of two hurricanes on approximately half of our stores and the shopping habits of our customer base in the affected locations and persistently warm weather, which has delayed demand for fall seasonal merchandise. In the quarter, boot sales were down 31%, reflecting approximately half of the comparable stores Net Sales decline in third quarter 2024. Comparable stores Net Sales growth in athletics partially offset these lower boot sales.

Long-term gross profit margin expansion has been a key driver of our profit transformation, led by our targeted promotional plans, buying strategies and growth of our customer loyalty program, Shoe Perks. During third quarter 2024, our gross profit margin was above 35% for the 15th consecutive quarter at 36.0% and decreased approximately 80 basis points compared to third quarter 2023, primarily due to higher buying, distribution and occupancy costs (“BD&O”) from operating more stores and the deleveraging effect of the lower, shifted Net Sales during the quarter.

17

On a year-to-date basis, which now includes the material offsetting impacts of the retail calendar shift, Net Sales in 2024 totaled $939.9 million, an increase of 4.9% versus year-to-date 2023 and gross profit margin was consistent with the prior year.

As market conditions softened in September and October, we lowered selling costs at Shoe Carnival and Shoe Station stores. These lower selling expenses reflected optimized advertising spend, driven by our digital-first marketing strategy. In third quarter 2024, our selling, general, and administrative expenses (“SG&A”) were lower than third quarter 2023 by $3.9 million as these lower store selling expenses more than offset the cost of operating Rogan’s stores. While Rogan’s costs were an additional expense in third quarter 2024 compared to third quarter 2023, those cost increases were mitigated by the synergies captured during third quarter 2024 from completing the integration of Rogan’s store operations, marketing, e-commerce platforms, point-of-sale systems, merchandising and back office functions. We currently estimate that Rogan’s synergy capture will be over $1 million in Fiscal 2024, with a significant portion of that recognized in third quarter 2024.

Third quarter 2024 Operating Income totaled $24.5 million and decreased 12.2% versus third quarter 2023, primarily due to the lower Net Sales from the calendar shift and soft demand in September and October. These declines were partially offset by growth, principally from the Rogan’s acquisition and related synergies, as well as lower SG&A.

Operating Income in third quarter 2024 included $369,000 in merger and integration expenses related to the Rogan’s acquisition, of which $248,000 were in Cost of Sales and $121,000 were in SG&A.

Third quarter 2024 Net Income was $19.2 million, or $0.70 per diluted share, compared to third quarter 2023 Net Income of $21.9 million, or $0.80 per diluted share. The decrease reflected the lower Operating Income and a higher effective tax rate.

Merchandise Inventories totaled $406.6 million at the end of third quarter 2024, an increase of approximately $38.3 million compared to the end of third quarter 2023, primarily reflecting Rogan’s acquired inventory. Merchandise Inventories supporting the Shoe Carnival and Shoe Station bannered stores were approximately 1% lower on a dollar basis at the end of third quarter 2024 compared to the end of third quarter 2023.

At the end of third quarter 2024, we had total Cash, Cash Equivalents and Marketable Securities of $91.1 million. Cash and Cash Equivalents increased $17.3 million compared to the end of third quarter 2023, and cash flows from operations in year-to-date 2024 totaled $58.1 million. Fiscal 2023 year end marked the 19th consecutive year we ended the fiscal year with no debt, and in year-to-date 2024, we continued to fund our operations and growth investments, including the purchase of Rogan’s, from operating cash flows and without incurring debt. In year-to-date 2024, we have paid $44.4 million for Rogan’s and, based on the purchase price adjustments, we owed another $378,000 that was paid in November 2024. Up to an additional $5.0 million in consideration will be due in 2027 if three-year performance targets are met.

Results of Operations for Third Quarter Ended November 2, 2024 Compared to Third Quarter Ended October 28, 2023

Net Sales

Net Sales were $306.9 million during third quarter 2024, a decrease of $13.0 million or 4.1%, compared to third quarter 2023. The decrease reflected the impact of the calendar shift moving approximately $20 million of Net Sales out of third quarter 2024. Net Sales otherwise increased $7.0 million, or 2.2%, compared to third quarter 2023. This increase was primarily due to the acquisition of Rogan’s, which added Net Sales of $22.3 million in third quarter 2024, and new store growth in the Shoe Station banner, partially offset by a comparable stores Net Sales decline of 4.1%. During third quarter 2024, our comparable stores Net Sales grew in August due to our strong back-to-school performance; however, comparable stores Net Sales declined in September and October due to the impact of two hurricanes on approximately half of our stores and the shopping habits of our customer base in the affected locations and persistently warm weather, which has delayed demand for fall seasonal merchandise. In third quarter 2024, boot sales were down 31%, reflecting approximately half of the comparable stores Net Sales decline in the quarter. E-commerce sales were approximately 11% of merchandise sales in third quarter 2024, compared to 10% in third quarter 2023.

Gross Profit

Gross Profit was $110.4 million during third quarter 2024, a decrease of $7.3 million compared to third quarter 2023. Gross profit margin in third quarter 2024 was 36.0% compared to 36.8% in third quarter 2023. The decrease in gross profit margin was driven by BD&O, which increased in third quarter 2024 compared to third quarter 2023 due to higher occupancy costs associated with operating more stores and the deleveraging effect of lower Net Sales in third quarter 2024 compared to third quarter 2023. The decrease in gross profit margin was partially offset by a 50 basis point increase in merchandise margin in third quarter 2024 compared to third quarter 2023.

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Selling, General and Administrative Expenses

SG&A decreased $3.9 million in third quarter 2024 to $85.9 million compared to $89.8 million in third quarter 2023. The decrease in SG&A expenses was due primarily to lower selling costs at Shoe Carnival and Shoe Station bannered stores, partially offset by the costs associated with operating the recently acquired Rogan’s stores. As a percentage of Net Sales, SG&A were 28.0% in third quarter 2024 compared to 28.1% in third quarter 2023.

Interest Income and Interest Expense

Changes in our interest income and expense increased our income before taxes by $247,000 in third quarter 2024 compared to third quarter 2023. This increase was primarily due to higher interest earned on invested cash balances.

Income Taxes

The effective income tax rate for third quarter 2024 was 24.7% compared to 23.8% for third quarter 2023. Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events. The higher effective tax rate in third quarter 2024 compared to third quarter 2023 was primarily due to discrete adjustments recorded in third quarter 2023 that did not recur in third quarter 2024. For the full 2024 fiscal year, we expect our tax rate to be between 25.6% and 26.0% compared to the 23.7% effective tax rate recognized during the full 2023 fiscal year.

Results of Operations Year-to-Date Through November 2, 2024 Compared to Year-to-Date Through October 28, 2023

Net Sales

Net Sales were $939.9 million during year-to-date 2024 and increased 4.9% compared to year-to-date 2023. The increase was primarily due to the acquisition of Rogan’s, which added Net Sales of $63.9 million, and new store growth in the Shoe Station banner, partially offset by a 3.2% decrease in comparable stores Net Sales. E-commerce sales were approximately 10% of merchandise sales in year-to-date 2024, compared to 9% in year-to-date 2023. Year-to-date 2024 e-commerce sales were favorably impacted by the relaunch of www.shoecarnival.com in third quarter 2023 and the launch of www.shoestation.com in first quarter 2023.

Gross Profit

Gross Profit was $337.1 million during year-to-date 2024, an increase of $15.4 million compared to year-to-date 2023. Gross profit margin was 35.9% in both year-to-date 2024 and year-to-date 2023. This consistency was driven by stable merchandise margins and stable BD&O as a percentage of Net Sales in year-to-date 2024 compared to year-to-date 2023.

Selling, General and Administrative Expenses

SG&A increased $11.9 million, or 4.8%, in year-to-date 2024 to $260.0 million compared to $248.1 million in year-to-date 2023. The increase was primarily due to higher compensation-related costs, including compensation costs related to Rogan’s, and other Rogan’s-related operating expenses in year-to-date 2024, partially offset by other lower selling costs at Shoe Carnival and Shoe Station stores. As a percentage of Net Sales, SG&A were 27.7% in both year-to-date 2024 and year-to-date 2023.

Interest Income and Interest Expense

Changes in our interest income and expense increased our income before taxes by $675,000 in year-to-date 2024 compared to year-to-date 2023. This increase was primarily due to higher interest earned on invested cash balances.

Income Taxes

The effective income tax rate for year-to-date 2024 was 25.5% compared to 23.0% for year-to-date 2023. The higher effective tax rate in year-to-date 2024 compared to year-to-date 2023 was due to the decrease in tax benefits from share-settled equity awards in year-to-date 2024 and a state deferred tax benefit and other discrete adjustments included in year-to-date 2023 that did not recur in Fiscal 2024.

Liquidity and Capital Resources

Our primary sources of liquidity are $91.1 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of third quarter 2024, cash generated from operations and availability under our $100 million Credit Agreement. We believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are normally for working capital, which are principally inventory purchases, investments in our stores, such as rebanners and new stores, remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share

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repurchases under our share repurchase program and the financing of capital projects, including investments in new systems. As part of our growth strategy, we have also pursued strategic acquisitions of other footwear retailers.

Cash Flow - Operating Activities

Net cash generated from operating activities was $58.1 million in year-to-date 2024 compared to $69.4 million in year-to-date 2023. The change in operating cash flow was primarily driven by the timing of inventory and prepaid contracts payments.

Working capital increased on a year-over-year basis and totaled $391.3 million at November 2, 2024 compared to $340.6 million at October 28, 2023. The increase was primarily attributable to higher Merchandise Inventories and Accounts Receivable levels due to the acquisition of Rogan’s and a higher cash balance, partially offset by higher Accounts Payable. Our current ratio was 3.9 as of November 2, 2024 compared to 3.8 as of October 28, 2023.

Cash Flow – Investing Activities

Our cash outflows for investing activities are normally for capital expenditures. During year-to-date 2024 and 2023, we expended $24.8 million and $43.6 million, respectively, for the purchase of Property and Equipment, primarily related to store remodels and rebanners and opening four new Shoe Station stores.

Our Rogan’s acquisition in first quarter 2024 resulted in the payment of initial cash consideration of $44.4 million, net of cash acquired, during year-to-date 2024. Additional information regarding the Rogan’s acquisition, including information on the additional contingent consideration of up to $5.0 million, can be found in Note 2 — “Acquisition of Rogan Shoes” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our non-qualified deferred compensation plan. The balance of these Marketable Securities was $13.9 million at November 2, 2024, compared to $12.2 million at February 3, 2024 and $11.2 million at October 28, 2023. Additional information can be found in Note 5 — “Fair Value Measurements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

Cash Flow – Financing Activities

Our cash outflows for financing activities are typically for cash dividend payments, share repurchases or payments on our Credit Agreement. Shares of our common stock can be either acquired as part of a publicly announced repurchase program or withheld by us in connection with employee payroll tax withholding upon the vesting of stock-based compensation awards that are settled in shares. Our cash inflows from financing activities generally reflect stock issuances to employees under our Employee Stock Purchase Plan and borrowings under our Credit Agreement.

During year-to-date 2024, net cash used in financing activities was $11.6 million compared to $17.2 million during year-to-date 2023. The decrease in net cash used in financing activities was primarily due to the repurchase of $5.4 million of shares in year-to-date 2023 under our Board of Directors’ authorized share repurchase program compared to none in year-to-date 2024 and the decrease in shares surrendered by employees to pay taxes on stock-based compensation awards, partially offset by increased dividend payments.

Credit Agreement

On March 23, 2022, we entered into a $100 million Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement is collateralized by our inventory, expires on March 23, 2027, and uses a Secured Overnight Financing Rate (“SOFR”) as quoted by The Federal Reserve Bank of New York as the basis for financing charges. Material covenants associated with the Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0. We were in compliance with these covenants as of November 2, 2024.

The Credit Agreement contains certain restrictions. However, as long as our consolidated EBITDA is positive and there are either no or low borrowings outstanding, we expect these restrictions would have no impact on our ability to pay cash dividends, execute share repurchases or facilitate acquisitions from cash on hand. The Credit Agreement stipulates that cash dividends and share repurchases of $15 million or less per fiscal year can be made without restriction as long as there is no default or event of default before and immediately after such distributions. We are also permitted to make acquisitions and pay cash dividends or repurchase shares in excess of $15 million in a fiscal year provided that (a) no default or event of default exists before and immediately after the transaction and (b) on a proforma basis, the ratio of (i) the sum of (A) our consolidated funded indebtedness plus (B) three times our consolidated rental expense to (ii) the sum of (A) our consolidated EBITDA plus (B) our consolidated rental expense is less than 3.5 to 1.0. Among other restrictions, the Credit Agreement also limits our ability to incur additional secured or unsecured debt to $20 million.

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The Credit Agreement bears interest, at our option, at (1) the agent bank’s base rate plus 0.0% to 1.0% or (2) Adjusted Term SOFR plus 0.9% to 1.9%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment. During year-to-date 2024, we did not borrow or repay funds under the Credit Agreement. Letters of credit outstanding were $1.0 million at November 2, 2024 and our borrowing capacity was $99.0 million.

The terms “net worth”, “consolidated interest coverage ratio”, “consolidated funded indebtedness”, “consolidated rental expense”, “consolidated EBITDA”, “base rate” and “Adjusted Term SOFR” are defined in the Credit Agreement.

See Note 9 – “Debt” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 for a further discussion of our Credit Agreement and its covenants.

Capital Expenditures

Capital expenditures for Fiscal 2024, including actual expenditures in year-to-date 2024, are expected to be between $30 million and $35 million, with approximately $20 million to $25 million to be used for new and rebannered stores and remodels and approximately $10 million to $15 million for upgrades to our Evansville distribution center and e-commerce sales channels, various other store improvements, continued investments in technology and normal asset replacement activities. The resources allocated to projects are subject to near-term changes depending on the supply chain and potential inflationary and other macroeconomic impacts. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, rebannered, remodeled and relocated and the amount of lease incentives, if any, received from landlords. The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.

Store Portfolio

We opened four new Shoe Station branded stores, permanently closed one Shoe Carnival branded store and acquired 28 Rogan’s stores, which over time are being integrated into our Shoe Station banner, in year-to-date 2024. Increasing market penetration by adding new stores is a key component of our growth strategy. We currently have 431 stores and are targeting operating over 500 stores in 2028. We believe our current store footprint provides for growth in new markets within the United States as well as fill-in opportunities within existing markets. Since our acquisition of Shoe Station in December 2021, we have gained valuable insights about the Shoe Station customer base and have defined markets where we believe a Shoe Station bannered store may outperform our current Shoe Carnival bannered store located in those markets. The Company advanced its store rebanner growth strategy during third quarter 2024, with seven Shoe Carnival stores being rebannered to Shoe Station stores. Ten stores have now been rebannered. Through third quarter 2024, rebannered stores have outperformed expectations, and based on the successful results of the strategy to date, we plan to rebanner 25 additional Shoe Carnival stores to Shoe Station stores in the first half of Fiscal 2025. Future store growth may continue to be impacted by macroeconomic uncertainty, our ability to identify desirable locations and/or acquisition partners and increased focus on our emerging store rebanner strategy.

Dividends and Share Repurchases

On September 17, 2024, the Board of Directors approved the payment of a third quarter 2024 cash dividend paid to our shareholders. The quarterly cash dividend of $0.135 per share was paid on October 21, 2024 to shareholders of record as of the close of business on October 7, 2024. In third quarter 2023, the dividend paid was $0.120 per share. During year-to-date 2024 and 2023, we returned $11.0 million and $8.9 million, respectively, to our shareholders through our quarterly cash dividends. The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.

On December 14, 2023, our Board of Directors authorized a share repurchase program for up to $50.0 million of our outstanding common stock, effective January 1, 2024 (the “2024 Share Repurchase Program”). The purchases may be made in the open market or through privately negotiated transactions from time-to-time through December 31, 2024 and in accordance with applicable laws, rules and regulations. The 2024 Share Repurchase Program may be amended, suspended, or discontinued at any time and does not commit us to repurchase shares of our common stock. We have funded, and intend to continue to fund, share repurchases from cash on hand, and any shares acquired will be available for stock-based compensation awards and other corporate purposes. The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market and economic factors.

No share repurchases have been made to date in Fiscal 2024. During year-to-date 2023, we repurchased 230,696 shares of common stock at a total cost of $5.4 million.

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Our Credit Agreement permits the payment of dividends and repurchase of shares, subject to certain covenants and restrictions. See “Credit Agreement” above and Note 9 — “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 for a further discussion of the Credit Agreement, its covenants and restrictions regarding dividends and share repurchases and other matters. The Credit Agreement’s covenants and restrictions did not change during year-to-date 2024.

Seasonality

We have three distinct peak selling periods: Easter, back-to-school and Christmas. Our operating results depend significantly upon the sales generated during these periods. To prepare for our peak shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other periods of the year. Any unanticipated decrease in demand for our products or a supply chain disruption that reduces inventory availability during these peak shopping seasons could reduce our Net Sales and Gross Profit and negatively affect our profitability.

Recent Accounting Pronouncements

See Note 4 — “Recently Issued Accounting Pronouncements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that may have an impact on our condensed consolidated financial statements when adopted.

ITEM 3. QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in that the interest payable under the Credit Agreement is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We had no borrowings outstanding during year-to-date 2024.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of November 2, 2024, that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

On February 13, 2024, we acquired all of the stock of Rogan’s, a privately-held, 53-year-old work and family footwear company. Under the SEC’s rules and regulations, we are currently integrating Rogan’s into management's assessment of the effectiveness of our internal control over financial reporting as of February 1, 2025.

There have been no significant changes in our internal control over financial reporting that occurred during the quarter ended November 2, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHE R INFORMATION

ITEM 1A. RI SK FACTORS

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024.

ITEM 2. UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Period |  | Total Number of Shares Purchased |  |  | Average Price Paid per Share |  |  | Total Number Of Shares Purchased as Part of Publicly Announced Programs (1) |  |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under Programs (1) |
August 4, 2024 to August 31, 2024 |  |  | 0 |  |  | $ | 0.00 |  |  |  | 0 |  |  | $ | 50,000,000 |
September 1, 2024 to October 5, 2024 |  |  | 0 |  |  | $ | 0.00 |  |  |  | 0 |  |  | $ | 50,000,000 |
October 6, 2024 to November 2, 2024 |  |  | 0 |  |  | $ | 0.00 |  |  |  | 0 |  |  | $ | 50,000,000 |
|  |  | 0 |  |  |  |  |  |  | 0 |  |  |  |

(1)
On December 14, 2023, our Board of Directors authorized the 2024 Share Repurchase Program for up to $50.0 million of our outstanding common stock, effective January 1, 2024 and expiring on December 31, 2024.

ITEM 5. OTH ER INFORMATION

During third quarter 2024, no members of our Board of Directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, amended or terminated any contract, instruction or written plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement, as defined in the SEC’s rules.

ITEM 6. E XHIBITS

EXHIBIT INDEX

|  |  |  | Incorporated by Reference To
Exhibit No. |  | Description |  | Form |  | Exhibit |  | Filing Date |  | Filed Herewith
3-A |  | Amended and Restated Articles of Incorporation of Registrant |  | 8-K |  | 3-A |  | 06/27/2022 |  |
3-B |  | By-laws of Registrant, as amended to date |  | 8-K |  | 3.B |  | 03/17/2023 |  |
10.1 |  | Amended and Restated Employment and Noncompetition Agreement, dated as of November 1, 2024, between the Company and Mark J. Worden |  | 8-K |  | 10.1 |  | 11/04/2024 |  |
10.2 |  | Amended and Restated Employment and Noncompetition Agreement, dated as of November 1, 2024, between the Company and Marc A. Chilton |  | 8-K |  | 10.2 |  | 11/04/2024 |  |
10.3 |  | Amended and Restated Employment and Noncompetition Agreement, dated as of November 1, 2024, between the Company and Patrick C. Edwards |  | 8-K |  | 10.3 |  | 11/04/2024 |  |
10.4 |  | Amended and Restated Employment and Noncompetition Agreement, dated as of November 1, 2024, between the Company and Carl N. Scibetta |  | 8-K |  | 10.4 |  | 11/04/2024 |  |
10.5 |  | Shoe Carnival, Inc. Amended and Restated 2017 Equity Incentive Plan, as amended November 1, 2024 |  |  |  |  |  |  |  | X
10.6 |  | Shoe Carnival, Inc. Amended and Restated 2016 Executive Incentive Compensation Plan, as amended November 1, 2024 |  |  |  |  |  |  |  | X
10.7 |  | Amended Form of Restricted Stock Unit Award Agreement under the Company’s 2017 Equity Incentive Plan (Executive Officers) |  |  |  |  |  |  |  | X
10.8 |  | Amended Form of Restricted Stock Unit Award Agreement under the Company’s Amended and Restated 2017 Equity Incentive Plan (Executive Officers) |  |  |  |  |  |  |  | X
31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
31.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X

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EXHIBIT INDEX - Continued

|  |  |  | Incorporated by Reference To
Exhibit No. |  | Description |  | Form |  | Exhibit |  | Filing Date |  | Filed Herewith
32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  | X
101.INS |  | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |  |  |  |  |  |  |  | X
101.SCH |  | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |  |  |  |  |  |  |  | X
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  |  |  |  |  |  |  | X

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SHOE CARNIVAL, INC.

SIGNA TURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed, on its behalf by the undersigned thereunto duly authorized.

Date: December 6, 2024 | SHOE CARNIVAL, INC.
| (Registrant)

| By: /s/ Patrick C. Edwards Patrick C. Edwards Senior Vice President, Chief Financial Officer, Treasurer and Secretary (Duly Authorized Officer and Principal Financial and Accounting Officer)

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