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


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 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; our ability to
operate the recently acquired Shoe Station assets, retain Shoe Station employees
and achieve expected operating results, synergies, and other benefits from the
Shoe Station acquisition within expected time frames, or at all; risks that the
Shoe Station acquisition may disrupt our current plans and operations or
negatively impact our relationship with our vendors and other suppliers; 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; 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 many of 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
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; 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 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 January 29, 2022.

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 29, 2022 as filed with the SEC. This
section of this Quarterly Report on Form 10-Q generally discusses our results
for the second quarter 2022 and the second quarter 2021 and year-over-year
comparisons between the second quarter 2022 and the second quarter 2021, as well
as year-to-date results between the two periods. However, given the significant
impact of the COVID-19 pandemic on our fiscal 2021 and fiscal 2020 results, we
have included certain comparisons in this MD&A between the second quarter 2022
and the second quarter 2019 and respective year-to-date periods to provide
further context regarding our second quarter and year-to-date 2022 results of
operations.

Referred to herein, the second quarter 2022 is the thirteen weeks ended July 30,
2022; the second quarter 2021 is the thirteen weeks ended July 31, 2021; and the
second quarter 2019 is the thirteen weeks ended August 3, 2019. Also referred to
herein, year-to-date 2022 is the twenty-six weeks ended July 30, 2022;
year-to-date 2021 is the twenty-six weeks ended July 31, 2021; and year-to-date
2019 is the twenty-six weeks ended August 3, 2019.

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Overview of Our Business


Shoe Carnival, Inc. is one of the nation's largest family footwear retailers.
After our acquisition of the physical stores and substantially all of the assets
and liabilities of Shoe Station, Inc. on December 3, 2021, we began operating
under two banners: Shoe Carnival and Shoe Station. 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, casual, and work 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, our e-commerce platform offers
customers the same assortment of merchandise in all categories of footwear with
expanded options through direct-ship arrangements with certain vendors.

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. Certain of our Shoe Carnival stores have
athletic shops that highlight leading athletic brands, and we expect to continue
growing our "athletic shop" in-store concept and other shop-in-shop concepts
across our fleet in the years ahead.

The addition of the Shoe Station banner and retail locations creates a
complementary retail platform to serve a broader family footwear customer base
across 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. See
Note 2 - "Acquisition of Shoe Station" to our Notes to Condensed Consolidated
Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on
Form 10-Q and Note 3 - "Acquisition of Shoe Station" 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 29, 2022, for further
discussion.

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, accounting for business
combinations, 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 29, 2022, and there have been no material changes
to those critical accounting policies.

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)
April 30, 2022              393               2               0           395        31,000       4,450,000                (10.6 )%
July 30, 2022               395               0               0           395             0       4,450,000                (13.8 )%

Year-to-date                393               2               0           395        31,000       4,450,000                (12.2 )%

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 %

Year-to-date                383               1               6           378       (34,000 )     4,112,000                 48.8 %



(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 or acquisition prior to the beginning of the period, including
those stores that have been relocated or remodeled. Therefore, all Shoe Station
sales (physical store and e-commerce) are excluded from our comparable store
sales. In addition, sales related to any Shoe Carnival bannered physical stores
recently opened or closed are not included in comparable store sales. We do
include e-commerce sales sold using the Shoe Carnival brand in our comparable
store sales as a result of our omnichannel retailer strategy. We view these
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          Twenty-six          Twenty-six
                                      Weeks Ended        Weeks Ended         Weeks Ended         Weeks Ended
                                     July 30, 2022      July 31, 2021       July 30, 2022       July 31, 2021
Net sales                                     100.0 %            100.0 %             100.0 %             100.0 %
Cost of sales (including buying,
distribution and
  occupancy costs)                             63.8               59.1                64.1                59.7
Gross profit                                   36.2               40.9                35.9                40.3
Selling, general and administrative
expenses                                       23.8               22.9                24.1                22.5
Operating income                               12.4               18.0                11.8                17.8
Interest expense (income), net                  0.0                0.0                 0.0                 0.0
Income tax expense                              3.1                4.7                 2.9                 4.6
Net income                                      9.3 %             13.3 %               8.9 %              13.2 %



Executive Summary for the Second Quarter Ended July 30, 2022


For the second quarter 2022, diluted net income per share was $1.04, the second
highest second quarter in our history and only surpassed by the second quarter
2021. The $1.04 per diluted share earned was more than double the amount earned
pre-pandemic in the second quarter 2019, and the $1.99 per share earned
year-to-date 2022 is greater than any full year earnings in our 44 years of
operation except for last year.

Net sales in the second quarter 2022 were $312.3 million and were also the
highest second quarter Net sales in our history except for last year. In a
challenging economic environment, our second quarter 2022 Net sales increased
16.4% and comparable store sales increased 8.0% compared to the pre-pandemic
second quarter 2019. Our physical store comparable store sales increased 4.2%
and e-commerce Net sales increased 75.3% compared to second quarter 2019.

Our second quarter 2022 results were positively impacted by sustained higher
gross profit margin compared to pre-pandemic results, new growth provided from
the Shoe Station acquisition and growth in our customer base. Gross profit
margin during the second quarter 2022 was 36.2%, a 560 basis point increase
compared to the second quarter 2019, due primarily to enhancements to our
customer relationship management capabilities and promotional strategies which
increased average selling prices. This was the primary driver for the comparable
store sales increase and was partially offset by increased transportation and
fuel costs. Shoe Station bannered stores contributed Net sales of $27.2 million
in the quarter and $53.4 million year-to-date. During the quarter we continued
growing our Shoe Perks loyalty program members. The 29.7 million Shoe Perks
members as of July 30, 2022 represented an increase in new customers of 6.9%
compared to the second quarter 2021 and 28.0% compared to the second quarter
2019.

Compared to the second quarter 2021, Net sales were down 6.0% and comparable
store sales declined 13.8% due to lower traffic and sales volume. This decrease
was due primarily to fluctuations in our customer base's discretionary income as
impacted by government stimulus in 2021 and inflation in 2022 and continued
COVID-19-related manufacturing and supply chain disruptions decreasing the
availability of athletic inventory in 2022. Lower athletic inventory levels
contributed to the decrease in comparable store athletic sales in the quarter.
Comparable store athletic sales were down 25.6% compared to 2021 and down 12.9%
compared to 2019. On a comparable store basis, non-athletic sales decreased 1.9%
compared to 2021 and increased 30.8% compared to 2019. Net sales attributed to
athletic sales were 40% in the second quarter 2022, compared to 47% in the
second quarter 2021 and 50% in the second quarter 2019.

We also incurred higher transportation and fuel costs in the second quarter 2022
compared to the second quarter 2021 and the second quarter 2019. The higher
transportation and fuel costs reduced our gross profit margin by 270 basis
points compared to the second quarter 2021 and by 300 basis points compared to
the second quarter 2019.

We ended the second quarter 2022 with Inventory of $385.5 million, an increase
of $48.6 million over the second quarter 2019. Approximately 59% of the increase
is inventory for the Shoe Station stores acquired last year or opened this year.
The 14.4% increase in Inventory is supportive of the 20.6% increase in Net sales
year-to-date 2022 compared to year-to-date 2019 and the expectation of increases
in Net sales compared to 2019 for the remainder of the fiscal year.

We had no borrowings outstanding under our credit facility, which was amended
and restated during the first quarter 2022, and we ended the second quarter 2022
with $62.6 million of cash, cash equivalents and marketable securities. Our new
credit facility expires on March 23, 2027.

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We are currently in the process of modernizing our stores and plan to have over
50% of our stores modernized by the summer of 2023 and the full program complete
by the end of fiscal 2024.

Two new stores were opened in year-to-date 2022 and no stores were closed. Store
count is on track to reach 400 stores by the end of fiscal 2022. No store
closures during fiscal 2022 are anticipated.

Results of Operations for the Second Quarter Ended July 30, 2022 Compared to the
Second Quarter Ended July 31, 2021

Net Sales


Net sales were $312.3 million during the second quarter 2022 and decreased 6.0%
compared to the second quarter 2021. The decrease in Net sales was primarily the
result of a 13.8% comparable store sales decline due largely to fluctuations in
the discretionary income of our customer base and reduced availability of
athletic shoes in the second quarter 2022, partially offset by Net sales
attributable to new stores, mostly the Shoe Station stores. E-commerce sales
were approximately 9% of merchandise sales in the second quarter 2022, compared
to 10% in the second quarter 2021.

Gross Profit


Gross profit was $113.1 million during the second quarter 2022, a decrease of
$22.6 million compared to the second quarter 2021. Gross profit margin in the
second quarter 2022 was 36.2% compared to 40.9% in the second quarter 2021.
Merchandise margin decreased 2.8 percentage points and buying, distribution and
occupancy costs increased 1.8 percentage points as a percentage of Net sales
compared to the second quarter 2021. These changes were primarily the result of
the impact of inflation on transportation and fuel costs, other merchandise cost
increases and the de-leveraging of other buying, distribution and occupancy
costs due to lower Net sales in the second quarter 2022.

Selling, General and Administrative Expenses (“SG&A”)


SG&A decreased $1.7 million in the second quarter 2022 to $74.3 million compared
to $76.0 million in the second quarter 2021. The decrease was primarily
attributable to reduced incentive compensation expense as a result of maximum
performance achieved last year, partially offset by increased depreciation
expense resulting from investment in property and equipment related to our store
portfolio modernization plan. As a percentage of Net sales, SG&A was 23.8% in
the second quarter 2022 compared to 22.9% in the second quarter 2021.

Income Taxes


The effective income tax rate for the second quarter 2022 was 25.6% compared to
25.8% for the second quarter 2021. 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. For the full 2022 fiscal year, we expect our tax
rate to be between 25% and 26% compared to the 25.3% effective tax rate
recognized during the full 2021 fiscal year.

Results of Operations Year-to-Date Through July 30, 2022 Compared to
Year-to-Date Through July 31, 2021

Net Sales


Net sales were $629.8 million in year-to-date 2022, a decrease of 4.7% compared
to year-to-date 2021. The decrease in Net sales was primarily the result of a
12.2% comparable store sales decline due largely to fluctuations in the
discretionary income of our customer base and reduced availability of athletic
shoes in year-to-date 2022, partially offset by Net sales attributable to new
stores, mostly the Shoe Station stores. E-commerce sales were approximately 10%
of merchandise sales in year-to-date 2022, compared to 11% in year-to-date 2021.

Gross Profit


Gross profit was $226.0 million in year-to-date 2022, a decrease of $39.9
million compared to year-to-date 2021. Gross profit margin in year-to-date 2022
was 35.9% compared to 40.3% in year-to-date 2021. Merchandise margin decreased
2.0 percentage points and buying, distribution and occupancy costs increased 2.4
percentage points as a percentage of Net sales compared to year-to-date 2021.
These changes were primarily the result of the impact of inflation on
transportation and fuel costs, other merchandise cost increases and the
de-leveraging of other buying, distribution and occupancy costs due to lower Net
sales in year-to-date 2022.

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Selling, General and Administrative Expenses


SG&A increased $3.2 million in year-to-date 2022 to $151.8 million compared to
$148.6 million in year-to-date 2021. The overall increase in SG&A during
year-to-date 2022 was primarily attributable to continued investment in store
level wages and advertising and increased depreciation resulting from investment
in property and equipment related to our store portfolio modernization plan. The
increases were partially offset by lower levels of incentive compensation. As a
percentage of Net sales, SG&A was 24.1% in year-to-date 2022 compared to 22.5%
in year-to-date 2021.

Income Taxes

The effective income tax rate for year-to-date 2022 was 24.8% compared to 25.3%
for year-to-date 2021.

Liquidity and Capital Resources


Our primary sources of liquidity are $62.6 million of cash, cash equivalents and
marketable securities on hand at the end of the second quarter 2022, cash
generated from operations and availability under our $100 million credit
facility. While the effects of the COVID-19 pandemic and other economic
uncertainty associated with inflation, constrained supply chains and the Eastern
European conflict, among other macroeconomic uncertainty, make 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.

Cash Flow – Operating Activities


Net cash generated from operating activities was $8.9 million in year-to-date
2022 compared to $79.8 million during year-to-date 2021. The change in operating
cash flow was primarily driven by increased earnings in year-to-date 2021 and
timing of inventory purchases.

Working capital decreased on a year-over-year basis and totaled $287.7 million
at July 30, 2022 compared to $298.7 million at July 31, 2021. The decrease was
primarily attributable to lower cash balances due to the acquisition of Shoe
Station in December 2021 and share repurchases, partially offset by higher
merchandise inventory levels. Our current ratio was 2.5 as of July 30, 2022 and
July 31, 2021.

Cash Flow – Investing Activities

Our cash outflows for investing activities are normally for capital
expenditures. During year-to-date 2022 and 2021, we expended $50.2 million and
$12.1 million, respectively, for the purchase of property and equipment,
primarily related to our store portfolio modernization plan.


We invest in publicly traded mutual funds designed to mitigate income statement
volatility associated with our nonqualified deferred compensation plan. The
balance of these marketable securities was $11.0 million at July 30, 2022.
Additional information can be found in Note 4 - "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 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 year-to-date 2022, net cash used in financing activities was $27.6
million compared to $10.3 million during year-to-date 2021. The increase in net
cash used in financing activities was primarily due to the repurchase of $20.5
million of shares in year-to-date 2022, compared to the repurchase of $4.0
million of shares in year-to-date 2021, associated with our Board of Directors'
authorized share repurchase program .

Capital Expenditures


Capital expenditures for fiscal 2022, including actual expenditures in
year-to-date 2022, are expected to be between $63 million and $73 million, with
approximately $53 million to $58 million to be used for new stores, relocations
and remodels and approximately $10

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million to $15 million for upgrades to our e-commerce platform, 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 COVID-19, ongoing
supply chain disruptions, and other macroeconomic uncertainty. 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 opened one Shoe Carnival branded store and one Shoe Station branded store in
year-to-date 2022. Increasing market penetration by adding new stores is a key
component of our growth strategy. We are on track to achieve 400 stores by the
end of fiscal 2022 and aim to add over 20 new stores in fiscal 2023 and over 25
new stores annually by fiscal 2024, across both banners. These store objectives
will be accomplished through a combination of both organic and acquired store
growth. 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. In the near term, we expect to pursue fill-in opportunities
for store growth across large and mid-size markets as we continue to leverage
customer data from our customer relationship management program. We believe more
attractive real estate options will be available with the addition of the Shoe
Station retail concept to our portfolio. However, our future store growth may
continue to be impacted by the COVID-19 pandemic and other macroeconomic
uncertainty.

Over the last several years, we performed a store rationalization and
performance improvement plan. As part of the plan, which is now complete, we
identified underperforming stores and worked to address the performance of these
stores through renegotiation of lease terms, relocation or closure. While we
continue to actively monitor the store portfolio, we do not expect any further
significant closures over the next several years.

Credit Facility


On March 23, 2022, we entered into a new $100 million Amended and Restated
Credit Agreement (the "New Credit Agreement"), which replaced our existing
credit agreement. The New 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 New 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 July 30, 2022.

The New 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 New 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 New Credit Agreement also limits our ability to incur
additional secured or unsecured debt to $20 million.

The New 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 2022, we did not borrow or repay funds under our prior credit
facility or the New Credit Agreement. Letters of credit outstanding were
$700,000 at July 30, 2022 and our borrowing capacity was $99.3 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 New Credit Agreement.

Dividends


On June 23, 2022, the Board of Directors approved the payment of a second
quarter 2022 cash dividend to our shareholders. The quarterly cash dividend of
$0.090 per share was paid on July 25, 2022 to shareholders of record as of the
close of business on July 11, 2022. In the second quarter 2021, the dividend
paid was $0.070 per share. During the first half of 2022 and 2021, we returned
$5.1 million and $4.0 million, respectively, to our shareholders through our
quarterly cash dividends.


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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, subject to restrictions as outlined above in the "Credit Facility"
discussion. See 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 January 29, 2022 for a further discussion of our credit
facility.

Share Repurchase Program

On December 16, 2021, our Board of Directors authorized a share repurchase
program for up to $50.0 million of outstanding common stock, effective January
1, 2022 (the "2022 Share Repurchase Program"). The purchases may be made in the
open market or through privately negotiated transactions from time-to-time
through December 31, 2022 and in accordance with applicable laws, rules and
regulations. The 2022 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 and are subject to restrictions as outlined
above in the "Credit Facility" discussion. See 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 January 29, 2022 for a further
discussion of our credit facility.

No shares were repurchased during the second quarter of 2022 under the 2022
Share Repurchase Program. During year-to-date 2022, we repurchased 682,886
shares of common stock at a total cost of $20.5 million under the 2022 Share
Repurchase Program. As of July 30, 2022, we had $29.5 million available for
future repurchases. Due to uncertainty related to the COVID-19 pandemic, share
repurchases were limited in fiscal 2021. In year-to-date 2021, we repurchased
117,068 shares of common stock at a total cost of $4.0 million.

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.

© Edgar Online, source Glimpses



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