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OFFON

SHOE CARNIVAL, INC.

(SCVL)
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SHOE CARNIVAL INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/29/2021 | 04:03pm EST

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: the duration and spread of the COVID-19 pandemic, mitigating efforts
deployed, including the effects of government stimulus on consumer spending, and
the pandemic's overall impact on our operations, including our stores, supply
chain and distribution processes, economic conditions, and financial market
volatility; general economic conditions in the areas of the continental United
States and Puerto Rico where our stores are located; the effects and duration of
economic downturns and unemployment rates; changes in the overall retail
environment and more specifically in the apparel and footwear retail sectors;
our ability to generate increased sales; our ability to successfully navigate
the increasing use of online retailers for fashion purchases and the impact on
traffic and transactions in our physical stores; the success of the open-air
shopping centers where our stores are located and its 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
potential impact of national and international security concerns on the retail
environment; the effectiveness of our inventory management, including our
ability to manage key merchandise vendor relationships and emerging
direct-to-consumer initiatives; changes in our relationships with other key
suppliers; our ability to control costs and meet our labor needs in a rising
wage and/or inflationary environment; 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; the impact of competition and pricing; 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; the impact of natural disasters, other public health crises,
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; 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 successfully execute our
business strategy, including the availability of desirable store locations at
acceptable lease terms, 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 January 30, 2021, and "Risk
Factors" in Part II, Item 1A of our Quarterly Reports on Forms 10-Q for the
quarters ended May 1, 2021 and July 31, 2021.



General


Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") 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 January 30, 2021 as filed with the SEC.



Overview of Our Business


Shoe Carnival, Inc. is one of the nation's largest family footwear retailers,
providing customers the convenience of shopping at any of our store locations,
our mobile app or online at www.shoecarnival.com. Our stores combine competitive
pricing with a promotional, high-energy in-store environment that encourages
customer participation and injects fun and excitement into every shopping
experience. We believe our distinctive shopping experience gives 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. A similar customer experience is
reflected in our e-commerce platform through special promotions and limited time
sales.

Our objective is to be the omnichannel retailer-of-choice for on-trend branded
and private label footwear for the entire family. Our product assortment,
whether shopping in a physical store or on our e-commerce platform, includes
dress and casual shoes, sandals, boots and a wide assortment of athletic
shoes. Our average physical store carries shoes in four general categories -
women's, men's, children's and athletics, as well as a broad range of
accessories. Footwear 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

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statements by grouping similar footwear from multiple vendors. Over 100 of our
physical stores have strongly branded Nike shops that highlight Nike products
within the stores, and we expect to add at least 100 more Nike shops to our
physical stores through 2023. Our e-commerce platform offers customers the same
assortment of merchandise in all categories of footwear with expanded options in
certain instances.

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, 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
January 30, 2021, and there have been no material changes to those critical
accounting policies.

Information regarding the COVID-19 Coronavirus Pandemic ("COVID-19")


We continue to closely monitor and manage the impact of the COVID-19 pandemic,
and the safety and well-being of our customers, employees and business partners
remains a top priority. The COVID-19 pandemic has significantly impacted, and is
expected to continue to impact, our operations, supply chains, distribution
processes, and overall economic conditions and consumer spending for the
foreseeable future.

In response to the COVID-19 pandemic, all of our physical stores were
temporarily closed effective March 19, 2020. Our e-commerce platform continued
to operate, and our e-commerce sales increased significantly in fiscal 2020 as
customers shifted purchases to our online channel. We began reopening our
physical stores in accordance with applicable public health guidelines in late
April 2020. Thus, substantially all of our physical stores were closed for
approximately 50% of the first fiscal quarter of 2020. By the beginning of the
second quarter of fiscal 2020, approximately 50% of our stores were reopened,
and by early June 2020, substantially all of our stores had reopened. We did not
have any stores closed as of October 30, 2021 or for extended periods during the
first nine months of fiscal 2021 due to the pandemic.

Results of Operations Summary Information



                                                Number of Stores                         Store Square Footage
                                Beginning                                  End of         Net            End            Comparable
Quarter Ended                   Of Period       Opened        Closed       

Period Change of Period Store Sales(1) May 1, 2021

                            383             0            6          377       (46,000 )     4,100,000                125.8 %
July 31, 2021                          377             1            0          378        12,000       4,112,000                 11.4 %
October 30, 2021                       378             0            1          377        (7,000 )     4,105,000                 30.1 %

Year-to-date                           383             1            7          377       (41,000 )     4,105,000                 41.6 %

May 2, 2020                            392             0            2          390       (22,000 )     4,198,000                (42.3 )%
August 1, 2020                         390             2           10          382       (66,000 )     4,132,000                 12.6 %
October 31, 2020                       382             1            0          383        10,000       4,142,000                  0.9 %

Year-to-date                           392             3           12          383       (78,000 )     4,142,000                 (8.8 )%



(1) Comparable store sales is a key performance indicator for us. Comparable

store sales include stores that have been open for 13 full months after

such stores' grand opening prior to the beginning of the period, including

those stores that have been relocated or remodeled. Therefore, stores

recently opened or closed are not included in comparable store sales. We

include e-commerce sales in our comparable store 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.




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



                                           Thirteen               Thirteen             Thirty-nine            Thirty-nine
                                         Weeks Ended            Weeks Ended            Weeks Ended            Weeks Ended
                                       October 30, 2021       October 31,

2020 October 30, 2021October 31, 2020 Net sales

                                          100.0 %                100.0 %                100.0 %                100.0 %
Cost of sales (including buying,
distribution and
  occupancy costs)                                  59.6                   68.0                   59.7                   72.1
Gross profit                                        40.4                   32.0                   40.3                   27.9
Selling, general and administrative
expenses                                            22.9                   24.7                   22.6                   26.3
Operating income                                    17.5                    7.3                   17.7                    1.6
Interest income                                      0.0                    0.0                    0.0                    0.0
Income tax expense                                   4.4                    1.9                    4.5                    0.4
Net income                                          13.1 %                  5.4 %                 13.2 %                  1.2 %




Given the significant impact of the COVID-19 pandemic on our fiscal 2020
results, we have included certain comparisons in this MD&A between fiscal 2021
and fiscal 2019 to provide further context regarding our fiscal 2021 results of
operations.

The shares outstanding and net income per share information throughout this MD&A
has been adjusted retroactively for all periods presented as a result of a
two-for-one stock split of the outstanding shares of our common stock held by
shareholders of record on July 6, 2021 that was completed on July 19, 2021. See
Note 1 - "Basis of Presentation" to our Notes to Consolidated Financial
Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for
additional information on the stock split.

Executive Summary for the Third Fiscal Quarter Ended October 30, 2021




The third quarter of fiscal 2021 was another record-breaking quarter. Results
for the third quarter of fiscal 2021 were the highest in terms of quarterly net
sales, gross profit, operating income and diluted net income per share in our
history, surpassing our previous records set in the second and first quarters of
fiscal 2021. Thus, this fiscal quarter represented the third consecutive quarter
where we established all-time quarterly records. Through the first nine months
of fiscal 2021, our diluted net income per share of $4.69 exceeded the diluted
net income per share earned during the last five fiscal years combined.

Comparable store sales in the third quarter of fiscal 2021 increased 30.1% compared to the third quarter of fiscal 2020 and increased 31.4% compared to the third quarter of fiscal 2019.

We believe these record-breaking results were driven by the following:

  • our inventory selection;


  • our more focused promotional strategy;

• our customer base returning to a more normal lifestyle, including going back

to work and fully back to in-person learning; and

• a stronger economy, inclusive of the impacts of government stimulus on

consumer spending.



During the third quarter of fiscal 2021, physical store traffic increased 29.9%
compared to the third quarter of fiscal 2020 and increased 2.6% compared to the
third quarter of fiscal 2019. Through the first nine months of fiscal 2021,
physical store traffic increased over 40% compared to the same period in fiscal
2020. The increased store traffic, combined with stable conversion rates,
resulted in an increased number of converted customers, compared to the prior
year periods.

All of our major product categories had comparable store sale increases ranging
from low to mid double digits compared to the third quarter of fiscal 2020 and
the third quarter of fiscal 2019. These increases were driven by higher average
per unit prices across all categories and, overall, more units sold.



Highlights for the third quarter of fiscal 2021 and a brief discussion of some key initiatives follows:

• Net sales for the third quarter of fiscal 2021 of $356.3 million set another

      all-time quarterly record, eclipsing the previous all-time records
      established earlier this fiscal year.


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• Net income for the third quarter of fiscal 2021 was $46.8 million, or $1.64

per diluted share, compared to net income of $14.7 million, or $0.51 per

diluted share in the third quarter of fiscal 2020. Earnings in the third

quarter of fiscal 2021 exceeded any previous quarterly or full-year record,

including exceeding results recognized in the first quarter and second

quarter of fiscal 2021, which were records at those points in time.

• We achieved record quarterly gross profit of $144.1 million during the third

quarter of fiscal 2021. Gross profit margin as a percent of sales increased

8.4 percentage points compared to the third quarter of fiscal 2020 to 40.4%

and increased 9.5 percentage points compared to the third quarter of fiscal

2019.

• We had no borrowings during the third quarter of fiscal 2021 and ended the

      quarter with $191.2 million of cash, cash equivalents and marketable
      securities.

• In the third quarter of fiscal 2021, we continued to increase membership in

our Shoe Perks customer loyalty program, which grew over 10% compared to the

prior year third quarter. This brought total membership in the program to

over 28.5 million customers as of October 30, 2021. We believe our Shoe

Perks program affords us opportunities to communicate, build relationships

      and engage with our most loyal shoppers, which we believe will result in
      long-term customer commitment to our brand.

• We are continuing to modernize our stores and expect to have approximately

100 stores completed by the spring of fiscal 2022, within our plan to

modernize 90 percent of our store portfolio by 2025.

Results of Operations for the Third Quarter Ended October 30, 2021

Net Sales


Net sales were a record $356.3 million during the third quarter of fiscal 2021
and increased 29.8% compared to the third quarter of fiscal 2020. Comparable
stores sales increased 30.1% compared to the third quarter of fiscal 2020. Sales
generated from our comparable physical stores increased 32.8% for the third
quarter of fiscal 2021 compared to the third quarter of fiscal 2020 and 22.6%
compared to the third quarter of fiscal 2019. Sales generated from our
e-commerce platform increased 12.5% compared to the third quarter of fiscal 2020
and 186.2% compared to the third quarter of fiscal 2019. E-commerce sales were
approximately 12% of merchandise sales in the third quarter of fiscal 2021,
compared to 13% in the third quarter of fiscal 2020 and 5% in the third quarter
of fiscal 2019.

Net sales were positively impacted by continued demand for our merchandise as
result of our merchandise selection, the continued easing of COVID-19
restrictions and customers returning a more normal lifestyle, including going
back to work and fully back to in-person learning, and a stronger economy
(including impacts from consumer-based government stimulus). Net sales in the
third quarter of fiscal 2021 were favorably impacted by increased average
transaction price and more units sold compared to the third quarter of fiscal
2020, with traffic 2.6% above pre-pandemic levels experienced in the third
quarter of fiscal 2019. The increase in average transaction price was primarily
driven by our more focused promotional activity.

Gross Profit




Gross profit was a record $144.1 million during the third quarter of fiscal
2021, an increase of $56.3 million compared to the third quarter of fiscal
2020. Gross profit margin in the third quarter of fiscal 2021 increased to 40.4%
compared to 32.0% in the third quarter of fiscal 2020 and 30.9% in the third
quarter of fiscal 2019. Merchandise margin increased 6.7 percentage points
compared to the third quarter of fiscal 2020 and 8.3 percentage points compared
to the third quarter of fiscal 2019. Our more focused promotional strategy drove
a higher merchandise margin compared to both fiscal 2020 and 2019. We began
eliminating broad-based use of the "buy one get one half off" promotional
strategy during fiscal 2020 and have completely eliminated its broad use during
the current fiscal year.

As a percentage of sales, our buying, distribution and occupancy costs decreased
1.7 percentage points compared to the third quarter of fiscal 2020 due to the
leveraging effect of higher sales, despite higher supply chain expense.

Selling, General and Administrative Expenses ("SG&A")


SG&A increased $14.0 million in the third quarter of fiscal 2021 to $81.6
million compared to $67.6 million in the third quarter of fiscal 2020. Nearly
half of the increase in SG&A in the third quarter of fiscal 2021 compared to the
third quarter of fiscal 2020 was due to increased advertising expense, with the
remaining increase primarily attributable to store level wages, including
incentive compensation. As a percentage of net sales, SG&A was 22.9% in the
third quarter of fiscal 2021 compared to 24.7% in the third quarter of fiscal
2020 and 24.3% recorded in the third quarter of fiscal 2019, with the decrease
due to the leveraging effect of higher sales.

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Income Taxes


The effective income tax rate for the third quarter of fiscal 2021 was 24.8%
compared to 26.8% for the same period in fiscal 2020. 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 lower quarterly effective tax
rate was primarily due to the timing of discrete tax adjustments and increased
utilization of foreign tax credits associated with our Puerto Rico
operations. For the full 2021 fiscal year, we expect our tax rate to be between
25% and 26% compared to the 25.8% effective tax rate recognized during the full
2020 fiscal year.

Results of Operations for the Nine-Month Period Ended October 30, 2021

Net Sales


Net sales were $1,017.0 million year-to-date in fiscal 2021, a 40.7% increase
over the prior year's year-to-date net sales of $722.9 million. The overall
increase in net sales was primarily due to our more focused promotional
strategies and inventory selection. The temporary closure of our physical stores
for approximately 50% of the first quarter of fiscal 2020 as a result of the
COVID-19 pandemic, with some stores closed through May 2020, decreased net sales
in the prior year. Comparable stores sales increased 41.6% compared to the first
nine months of fiscal 2020 and increased 29.2% compared to the first nine months
of fiscal 2019.

Gross Profit

Gross profit was $410.0 million during the first nine months of fiscal 2021, an
increase of $208.1 million compared to the first nine months of fiscal
2020. Gross profit margin in the first nine months of fiscal 2021 increased to
40.3% compared to 27.9% in fiscal 2020 and 30.4% in fiscal 2019. Merchandise
margin increased 10.0 percentage points compared to the first nine months of
fiscal 2020 and 8.7 percentage points compared to the first nine months of
fiscal 2019. Our more focused promotional strategies throughout fiscal 2021
drove a higher merchandise margin compared to both fiscal 2020 and 2019. A more
standard product mix, with more non-athletic merchandise sold in fiscal 2021
compared to fiscal 2020, further increased margins compared to fiscal 2020.



As a percentage of sales, our buying, distribution and occupancy costs decreased
2.4 percentage points compared to the first nine months of fiscal 2020 and 1.2
percentage points compared to the first nine months fiscal 2019 primarily due to
the leveraging effect of increased sales, offset somewhat by increased freight
and distribution labor costs.

Selling, General and Administrative Expenses


SG&A increased $39.7 million to $230.2 million in the first nine months of
fiscal 2021 compared to $190.5 million in the first nine months of fiscal
2020. As a percentage of net sales, SG&A was leveraged to 22.6% in the first
nine months of fiscal 2021 compared to 26.3% in the first nine months of fiscal
2020 and 24.2% in the first nine months fiscal 2019.

Compared to the first nine months of fiscal 2020, the increase in SG&A primarily
correlated with our record performance, in terms of increased performance-based
incentive compensation, general wages (inclusive of CARES Act payroll retention
tax credits recognized in fiscal 2020) and variable costs, such as credit card
fees. SG&A also increased due to higher advertising expense, as well as market
return volatility on our deferred compensation plan and higher stock-based
compensation. Store level wages, incentives paid to store level employees, and
annual performance-based compensation comprised the majority of the year-to-date
increase compared to the prior year. Our performance year-to-date has exceeded
annual fiscal 2021 performance targets; therefore, virtually all annual
performance-based compensation expected for the full year has been recognized.

Income Taxes


The effective income tax rate year-to-date for fiscal 2021 was 25.1% compared to
23.0% for the same period in fiscal 2020. The higher effective rate was
primarily attributable to more unfavorable permanent differences and discrete
tax adjustments, partially offset by increased utilization of foreign tax
credits associated with our Puerto Rico operations.

Liquidity and Capital Resources


Our primary sources of liquidity are $191.2 million of cash, cash equivalents
and marketable securities on hand at the end of the third fiscal quarter of
2021, cash generated from operations, and availability under our $100 million
credit facility. While the continued economic uncertainty and future effects on
customer behavior caused by the COVID-19 pandemic makes our operating cash flow
less predictable, 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 new stores, remodels and relocations,
distribution center initiatives, lease payments associated with our real estate
leases, potential dividend payments, potential share repurchases under our share
repurchase program, and the financing of capital projects, including investments
in new systems. As part of our growth strategy, we may also pursue strategic
acquisitions of other footwear retailers.

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Cash Flow - Operating Activities


Net cash generated from operating activities was $120.5 million in the first
nine months of fiscal 2021 compared to $0.2 million during the first nine months
of fiscal 2020. The increase in operating cash flow was primarily driven by
higher cash receipts on increased sales, partially offset by inventory purchases
and payments for operating expenses and income taxes.



Working capital increased on a year-over-year basis and totaled $333.8 million
at October 30, 2021 compared to $214.9 million at October 31, 2020. The increase
was primarily attributable to increased cash and marketable securities
positions. Our current ratio was 3.1 as of October 30, 2021 compared to 2.7 as
of October 31, 2020.

Cash Flow - Investing Activities


Our cash outflows for investing activities are normally for capital
expenditures. During the first nine months of fiscal 2021, we expended $20.4
million for the purchase of property and equipment, primarily related to our
store portfolio modernization plan. During the first nine months of fiscal 2020,
we expended $10.1 million for the purchase of property and equipment, primarily
related to investments in technology and normal asset replacement activities.

During the first nine months of fiscal 2021, we invested approximately $17.5
million in publicly traded mutual funds designed to mitigate income statement
volatility associated with our nonqualified deferred compensation
plan. Additional information regarding these marketable securities can be found
in Note 5 - "Fair Value Measurements" to our Notes to 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 facility. 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
facility.

During the first nine months of fiscal 2021, net cash used in financing
activities was $15.8 million compared to $5.4 million during the first nine
months of fiscal 2020. The increase in net cash used in financing activities was
primarily due to the repurchase of $7.1 million of shares in fiscal 2021
associated with our Board of Directors' authorized share repurchase program. In
fiscal 2021 we also increased our dividend payments and more shares were
withheld upon the vesting of stock-based compensation awards. During the first
nine months of fiscal 2021, we did not borrow or repay funds under our credit
facility. Letters of credit outstanding were $700,000 at October 30, 2021, and
our borrowing capacity was $99.3 million.

Our credit facility requires us to maintain compliance with various financial
covenants. See Note 7 - "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 January 30, 2021 for a further discussion of our credit facility and
its covenants. We were in compliance with these covenants as of October 30,
2021.

Capital Expenditures



Capital expenditures for fiscal 2021, including actual expenditures for the
first nine months of fiscal 2021, are expected to be between $30 million and $35
million, with approximately $24 million to $26 million to be used for a new
store, relocations and remodels and approximately $2 million to $4 million for
upgrades to our distribution center and e-commerce platform. The remaining
capital expenditures are expected to be incurred for various other store
improvements, continued investments in technology and normal asset replacement
activities. The resources allocated to these projects are subject to near-term
changes depending on the impacts associated with the COVID-19 pandemic and
ongoing supply chain disruptions. Furthermore, the actual amount of cash
required for capital expenditures for store operations depends in part on the
number of stores opened, the number of stores relocated, the amount of lease
incentives, if any, received from landlords and the number of stores
remodeled. 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 continually analyze our store portfolio and the potential for new stores
based on our view of internal and external opportunities and challenges in the
marketplace.  Increasing market penetration by opening new stores has
historically been a key component of our long-term growth strategy, and we
continue to focus on generating positive long-term financial performance from
our store portfolio. We expect to pursue opportunities for store growth across
large and mid-size markets as we leverage customer data from our customer

                                       20

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relationship management program and more attractive real estate options become
available.  In fiscal 2021, we opened one new store within our existing
geographic footprint and do not anticipate opening any more stores this fiscal
year. We anticipate store growth will return after fiscal 2021.



When we identify a store that produces, or may potentially produce, low or
negative contribution, we either renegotiate lease terms, relocate or close the
store.  In instances when underperformance indicates the carrying value of a
store's assets may not be recoverable, we impair the store. Although store
closings could reduce our overall net sales volume, we believe this strategy
will realize long-term improvement in operating income and diluted net income
per share.  Depending upon the results of lease negotiations with certain
landlords of underperforming stores, we may increase or decrease the number of
store closures in future periods.  We closed seven stores in the first nine
months of fiscal 2021 and expect to close three additional stores by the end of
the current fiscal year.


Our future store strategies may continue to be impacted by the current economic uncertainty associated with the COVID-19 pandemic.

Dividends


On September 16, 2021, the Board of Directors approved the payment of a third
quarter cash dividend to our shareholders.  The quarterly cash dividend of
$0.070 per share was paid on October 18, 2021 to shareholders of record as of
the close of business on October 4, 2021. In fiscal 2020, the third quarter
dividend was $0.045 per share. During the first nine months of fiscal 2021 and
2020, we returned $6.0 million and $3.9 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. Our credit agreement permits the payment of cash dividends as long as
no default or event of default exists under the credit agreement both
immediately before and immediately after giving effect to the cash dividends,
and the aggregate amount of cash dividends for a fiscal year does not exceed $10
million. See Note 7 - "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 January 30, 2021 for a further discussion of our credit facility and
its covenants.

Share Repurchase Program

On December 15, 2020, our Board of Directors authorized a share repurchase
program for up to $50.0 million of outstanding common stock, effective January
1, 2021 (the "2021 Share Repurchase Program"). The purchases may be made in the
open market or through privately negotiated transactions from time-to-time
through December 31, 2021 and in accordance with applicable laws, rules and
regulations. The 2021 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 conditions.

Due to uncertainty related to the COVID-19 pandemic, share repurchases have been
limited in fiscal 2021 and no repurchases were made in fiscal 2020. Shares
totaling 91,594 shares were repurchased during the third quarter of fiscal 2021
at a cost of $3.2 million. We purchased a total of 208,662 shares at a cost of
$7.1 million under this share repurchase program in fiscal 2021. As of October
30, 2021, we had $42.9 million available for future repurchases. We will
continue to evaluate the repurchase of shares under the 2021 Share Repurchase
Program given the uncertainty.

Our credit facility stipulates that distributions in the form of redemptions of
Equity Interests (as defined in the credit agreement) can be made solely with
cash on hand so long as before and immediately after such distributions there
are no revolving loans outstanding under the credit agreement. See Note 7 -
"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 January 30,
2021 for a further discussion of our credit facility and its covenants.

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 in future periods could reduce our net sales and
gross profit and negatively affect our profitability.

                                       21

--------------------------------------------------------------------------------

Recent Accounting Pronouncements


See Note 3 - "Recently Issued Accounting Pronouncements" in the accompanying
notes included 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.

© Edgar Online, source Glimpses

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