Shares of Shoe Carnival (SCVL) soared in trading Tuesday as the company released its Q3 2014 results, which indicated better-than-expected performance in several areas.
The retailer of family footwear rose more than 18.9%, or $3.72, to close at $23.34 per share.
It was a welcome shift, considering that the stock had declined by more than 32% year to date leading up to Tuesday’s charge.
And the move up comes after TheStreet downgraded the stock to a “Hold” from a “Buy” based on the company’s weak growth in earnings per share, deteriorating net income, and disappointing return on equity.
But do the strong quarterly results portend a higher future stock price?
Reviewing Quarterly Performance
Let’s take a brief look at the company’s quarterly results…
- In the company’s just-released third-quarter results, revenue came in at $254.6 million, an 8.02% increase over Q3 2013 results. Revenue for the first nine months of FY 2014 also saw an increase, rising to $712.5 million. This represents a 4.1% jump over the same period a year ago. Both numbers exceeded the company’s guidance.
- Comparable same-store sales for the quarter increased 2.3%, but the increase wasn’t enough to help boost the company’s net income.
- Net income for the quarter was $10.8 million, nearly a 1% decline against the Q3 2013 revenue number of $10.9 million. The company reported a net income for the first nine months of FY 2014 of $22.5 million – a decrease of 14.1% over the same period in 2013.
- And while the company’s diluted earnings per share of $0.54 exceeded the expected $0.48 estimate, the number exactly matches the diluted EPS in the same quarter in 2013.
- Unfortunately, the nine-month EPS results showed a decrease of 13.1% – falling from $1.29 in Q3 2013 to $1.12 in Q3 2014.
Despite the mixed quarterly performance, however, there are reasons to be optimistic that Shoe Carnival can improve its bottom line and stock price in the future.
You see, the company has upped its guidance for the fourth quarter with expectations that net sales will be in the range of $218 million to $222 million. The company also now sees comparable same-store sales rising 3% to 5% for the quarter.
Shoe Carnival has provided guidance for the holiday quarter to show an EPS of between $0.06 and $0.10. This compares to $0.03 in the same quarter last year.
The guidance comes on news that the company is already seeing increased sales of its winter boots as the Northeast and Midwest brace for what looks to be another very cold winter.
But there are other reasons to like Shoe Carnival – such as share buybacks…
In Q3 2014, the company repurchased approximately 244,000 shares of its common stock at a total cost of $4.5 million. For the nine months that ended on November 1, 2014, approximately 405,000 shares were repurchased at an aggregate cost of $7.5 million – thus helping the company to shore up its earnings-per-share metric.
Lastly, it expects to open 31 new stores through FY 2014. This comes in combination with the shuttering of seven unprofitable locations by the end of the year.
So despite the downgrade, there are still plenty of reasons for shareholders of Shoe Carnival to have happy feet.