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Bear of the Day: Shoe Carnival (SCVL)

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Headquartered in Evansville, IN, Shoe Carnival (SCVL - Free Report) is a retailer of family footwear. Their stores offer both name brand and private label shoes in a carnival like atmosphere with games, neon signs, flashing lights and up-tempo music.

The company operates more than 400 stores in 35 states and Puerto Rico, and offers online shopping on their website.

Weak Guidance Reflects Rising Challenges

Earlier this month, the retailer provided comparable stores sales results for Q1 ended April 29, and an updated outlook for FY 2017 net sales and earnings per share.

Comparable store sales in the quarter declined 3.9% due to a slower start to the fiscal year. The retailer now expects FY 2017 net sales to be in the range of $1.002 billion to $1.018 billion and EPS in the range of $1.30 to $1.45. This was down from earlier outlook for net sales of $1.028 billion to $1.040 billion and EPS of $1.45 to $1.54.

The stock plunged about 12% after the release. The company will report Q1 results on May 24.

Falling Estimates

Analysts have slashed their estimates for the company after weak guidance.  Zacks Consensus Estimates for the current and next fiscal year have fallen to $1.43 per share and $1.58 per share from $1.53 and $1.65 respectively, 30 days back.




The Bottom Line

In addition to disappointing mall traffic, the retail space is going through a shift toward online shopping. With tightening labor markets, wage pressure has also started hurting retailers. The industry “Retail - Apparel and Shoes” is currently ranked 232 out of 265 Zacks industries (bottom 12%), suggesting potential underperformance in the short-to-medium term.

It would be better for investors to stay away from this stock and the industry in view of rising challenges.

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