Good morning and welcome to Shoe Carnival's Fourth Quarter 2024 Earnings Conference Call. Today's conference call is being recorded and is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks today may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. Forward-looking statements should also be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's earnings press release. Investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of today's date. The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements discussed on today's conference call or contained in today's press release to reflect future events or developments. Today's call will reference non-GAAP measures. The non-GAAP or adjusted results referenced exclude the purchase accounting, merger, integration and transaction costs related to the acquisition of Rogan's Shoes. A reconciliation of GAAP to non-GAAP results is included in today's earnings press release. I will now turn the conference over to Mr. Mark Worden, President and CEO of Shoe Carnival for opening remarks. Mr. Worden, you may begin.

Good morning everyone and thank you for joining us today for Shoe Carnival's fourth quarter 2024 earnings conference call. Joining me on today's call are Carl Scibetta, Chief Merchandising Officer; and Patrick Edwards, Chief Financial Officer. We're excited to share our fiscal 2024 growth results with you today and discuss the transformational news announced this morning about our Shoe Station growth strategy. First, I'll start with a brief overview of 2024 trends and results. Over the past few years, our industry has faced a challenging landscape with inflationary pressures constraining purchases among lower-income households and urban consumers. We've seen footwear customers shop at high engagement levels during key event periods, such as back-to-school and holiday and then pull back spending and engagement during non-key periods. Despite the many headwinds our customers and industry faced last year, our long-term strategies set our results apart from the competitive set and enabled us to deliver industry-leading sales growth during fiscal 2024 and achieve net income growth. We remain disciplined throughout the year, relentlessly focused on maximizing margin delivery, cost controls, synergy capture, profitably engaging customers and bringing the nation's best brands to market. We gained market share again in 2024. We entered new geographies, expanded our customer base and acquired a regional leader in the Midwest. Our balance sheet started fiscal 2024 strong and got even stronger by year-end. We expanded our cash flow generation and built up higher year-end cash balances during a year where we also acquired a chain from 100% cash on hand. We provided shareholders our 52nd consecutive dividend. And for the 20th consecutive year, we started a year with 0 debt and ended a year with zero debt. Ultimately, our strategies resulted in net income growth and EPS results at the very high end of our profit guidance…

Thank you, Mark. For full-year fiscal 2024, we achieved a net sales increase in line with our expectations and delivered $2.68 earnings per share which is at the very high end of our guidance. The sales trends we have been experiencing through 2024 continued during the fourth quarter. We performed well during the peak event times of Thanksgiving and Christmas. During off-peak times, we saw traffic and comp sales declines at our Carnival banner. I am very proud of our team as they manage their way through the changes in customer behavior. Utilizing well-thought-out targeted promotions and strong vendor partnerships, we achieved our product margin expectations. We increased our receipts in January to prepare for the first quarter rebid our stores as well as deliver product early to avoid the effect of potential supply chain disruptions and additional tariffs. Ending inventory was flat versus year-end 2023, excluding the inventory of Rogan's Shoes that was acquired during 2024. Patrick will take you through the individual product category performances for Q4. As I prepare for my retirement next month, I would like to congratulate Chief Merchandising Officer and Executive Vice President, Tanya Gordon, on her new role. Tanya brings extensive retail experience to the position and has played a key role within the Shoe Carnival merchant organization for 10-plus years. She has worked closely with Mark and the officer team and is a cultural leader within the company. Tanya has established excellent vendor relationships while at Shoe Carnival that have contributed greatly to the success of the company. I am very confident I leave the team in good hands. Being part of this industry for many years, I've had the pleasure to work with countless individuals. I would personally like to thank the vendor community for support they have given me year after year, especially thankful for your support for Shoe Carnival over the past 12-plus years. We together have achieved much success. I am most proud to have been part of this great company. I would like to thank Mark Worden, Cliff Sifford and the Board of Directors for giving me this amazing opportunity. Thank you to the management team here at Shoe Carnival for their unwavering support as well as our over 6,000 employees. A special thanks to the Shoe Carnival's amazing and talented merchant team. It has been my privilege to have been part of this team for over 12 years. We have seen a great deal of change and at times, unheard-of disruptions. You have performed brilliantly through it all. You truly are the best in class and I know you will achieve great success in the future. With that, I would like to thank our investors and analysts. I have enjoyed working with you over the years. I will now turn the call over to Patrick for a review of our financials. Patrick?

Carl, I would like to thank you for your guidance and leadership. Now moving on to our financial results. We delivered EPS at the high end of our guidance for the quarter at $0.54 per share on an adjusted basis and $0.53 per share on a GAAP basis and grew our annual top line and adjusted EPS compared to the prior year. Comparisons between our quarterly and annual results in fiscal 2024 compared to fiscal 2023 were impacted by a 1-week shift in the retail calendar which benefited net sales of approximately $20 million in fiscal 2023's 14-week fourth quarter and $15 million in fiscal 2023's 53-week year. We estimate the retail calendar shift contributed EPS of approximately $0.10 in the fourth quarter last year when we earned GAAP EPS of $0.57 and adjusted EPS of $0.59. Taking into account this $0.10 headwind, we otherwise grew our fourth quarter results, led by our Rogan's acquisition, inclusive of synergy capture and Shoe Station's industry-leading performance. Now going into more detail, starting with net sales. In the fourth quarter, net sales totaled $262.9 million, consistent with expectations compared to $280.2 million last year. As noted, sales in Q4 2023 benefited from the calendar shift by approximately $20 million. So net sales otherwise increased by approximately $2 million. Net sales in the comparable 52 weeks last year were led by growth from Shoe Station which outpaced the industry and Rogan's acquisition adding revenues of $16.5 million. On a comparable store basis which excludes the impact of the calendar shift, Rogan sales and other new store growth, net sales for the fourth quarter declined 6.3%, primarily due to Shoe Carnival sales in non-event periods. From a category perspective in the quarter, adult athletic sales decreased mid-singles, while athletic performance at our Shoe Station banner…

[Operator Instructions] Your first question comes from Mitch Kummetz with Seaport Research.

And Carl, I'd like to wish you all the best in retirement. Mark, let me start on the rebannering. So the 10-store test, if I understand it correctly, was all in the market. The 50 to 75 stores that you guys are doing in 2025, are those also all in market or some of them out of market? And I mean, it sounds like over time, some of these rebanner stores are going to be out of market. What gives you the confidence that this is going to work as well out of the market where you really haven't, I guess, tested it so far? And I have other questions.

Mitch, thank you for the question. We're very excited about the strategy. We've been mining this data for a few years now and it gives us great confidence that the higher income nonurban customer resonates with the Shoe Station banner, the premium assortment, the excellent service, the technical expertise we provide in this modern shopping experience. You're spot on, on the question. The 10 stores tested were all within existing markets and they performed very well. Again, to recap, sales in aggregate grew over 10% better than Shoe Carnival during that period of time and profits double digit with great growth in margin, customers in the higher income bracket and every core metric. As we march forward, this first tranche is focused on filling in gaps largely in the markets. Right now, we have multiple of these 50 to 75 stores rolling out already in existing markets where our Shoe Station is already known. And then the plan is to expand into new markets that are not covered within existing states. So for example, in the state of Florida, we have multiple rebannered stores going on right this minute, where we have underperforming Shoe Carnival stores. The demographics looked far superior to matching a Shoe Station. We're in the process of rebannering those now. So that would be an example of the expansion strategy in a state where the brand is known but markets where Carnival is underperforming. As the year progresses, we'll be broadening that to go where the demographics and data looks like it should work and we'll be methodically and slowly later in the year, expanding into new states, confirming that we have the strength of results that we've seen so far. It's not so really '26 that we see branching off into areas that are meaningfully different for Shoe Station and that's where we're going to be getting a lot of data and testing this year. So we're very confident when we do get into those newer markets further out of SEC, South, ACC kind of territories with March Madness on my mind as well, kind of that world will kind of branch out into Big 10 and big East country as we get into further years.

And then on the tariff, I think in Patrick's prepared remarks, it was mentioned that you guys are -- the guidance assumes some modest price increases. I was just hoping you could provide a little bit more color in terms of what you're seeing with the vendors that you work with in terms of what they're doing on pricing. And then on the private label side, what are you seeing in terms of kind of costing there? Any sort of color would be helpful.

Sure, Mitch. It's Carl. At this point, it's pretty unsettled right now. We're getting information from vendor to vendor that is different. In most cases, the vendors are able to assume some of those costs, negotiate with the factories. We're not seeing across-the-board price increases for fall based on tariffs but we might be seeing some price increases on individual items, newness, new items. But so far, things have held with the big core items. We're seeing some price increases potentially in the mid-single digit at the high and certainly, we believe we'll be able to tolerate those, pass those along where we can. So we've not seen anything meaningful today. Again, the vendors are all over the board as they continue to negotiate with factories and transportation and agents. So it's a bit -- it is unsettled right now but we don't -- we see some effect but not the 20% that you hear about coming out of China right now.

And if I could build on it, it's Mark. And that's what our guide assumes continues. As Carl laid out, what we're seeing today, if we see a volatile swing with double-digit changes pass through from Vietnam in particular or major China implications, that is not implicit in our guidance we provided today and we would revisit that if that changes. But as Carl said, we've not experienced that sharp implication yet.

And then I guess maybe as a last question, just on the guide. So for the full year, you're giving us sales and GAAP earnings. Is there any more you can say in terms of what comp outlook is embedded in that as well as maybe a margin breakout, kind of any thoughts around gross margin, op margin? And then in the first quarter, is there sort of an EPS range that you're looking at in the first quarter? And I wasn't really clear what the rebranding impact -- rebannering impact is in Q1. Is it -- I think you said something like $0.15 to $0.20? Maybe just more clarity there.

Mitch, it's Patrick. Nice to talk to you. With respect to the first part of comp, we expect minimal store openings and closings next year. So the guide that we provided of up 2% to down 4% would be the same for both total sales and comp. On gross profit margin, our expectation is we -- both Mark and I touted the fourth year above 35% our expectation for next year based on where we sit today. And as Carl mentioned and Mark mentioned with respect to the impact of tariffs on things that we think are happening in our guide, we think that above 35% is going to stick for next year. There's obviously a lot of play in that number given the uncertainty and unsettling in the market right now. In Q1, we're going to reiterate what we said before which is what we've seen so far today on sales which is that they're down in nonevent periods, much like they were in Q4 last year. and that we expect it to be a little bit worse than that because of the rebanner strategy. So a sales forecast would be -- would be outside of our guidance range for Q1 if you take both of those things into account. And then with respect to the rebanner strategy, the $0.65 is obviously a range. It's not an exact number. We would love to be that good but we are obviously not that good with the number of stores. And the guide for that is going to stick with the $0.15 to $0.20 impact for Q1. But they are duplicative, the nonevent sort of thing that we've seen thus far that Mark talked about and then the $0.15 to $0.20 on the rebanner strategy.

Your next question comes from Sam Poser with Williams Trading.

I'll save the best question for last. But the -- I want to just follow up on Mitchel's question regarding how many stores are you -- can you sort of give us the breakdown of how many stores you're rebannering by quarter or something? Can you just say, okay, of these 50 to 75 x percent will be at what time -- by what quarter or within which quarters? I know some will overlap quarters but…

Hi Sam, good morning. It's Mark. Thanks for the question. We plan at half the guide range before back-to-school and half the guide range after back-to-school is the simplest way to say that.

So with the majority -- with that -- and you wouldn't be doing it during holidays. So could we assume that -- and you want to be ready for back-to-school. Could we assume that Q1 and Q3 would be the most -- sorry, Q1 and the end of Q3 into the beginning of Q4 be the most impacted periods of time from this? Is that the right way to think about it?

It's not wrong. The back half is still not 100% firm but you're absolutely right thinking about we'll be doing the work in downtime and nonevent periods. It's the approach for the most part. We don't want to impact customer and shopping behavior during BTS or holiday period so spot on with that. We're going right now with -- again, we don't have the exact point that we're guiding but it wouldn't be wrong to think we get in that 35 to 40-ish of the stores before back-to-school gets going. That would be a nice ambition of us if everything goes smooth with construction and product and materials. So it wouldn't be wrong to think about it that way. And then we'll pick back up after back-to-school with the maximum amount we can accomplish without distracting the holiday period in sync with getting the great product in stores and construction flawless. So you could see some go into January if we feel it's too late to not impact DAT and holiday. But the way you described it is right, overall.

So then, like your comps from -- just theoretically, your comps in -- during the back-to-school season which arguably is the end of Q2 into early September and then holiday comps, given the event period and the timing of all of this should be the best comp periods of the year for both the event period situation and these stores will be open and going and theoretically performing at a better rate than they did before.

Yes, absolutely. Yes, spot on. By holiday, we'll have between 22% and 27% of the company under the station banner compared to nine-something as we started the year. So you're absolutely right. As that percent starts to become a meaningful scale, it will start offsetting what we anticipate mid-to-high single declines in Carnival and why we're moving as fast as possible because as we said, we had comp growth in Station last year and we're very pleased with where it's gone. So bang on. By back-to-school, it will be our strongest period of growth, we expect also. stations don't have the scale to demonstrably move the needle. But as we flip forward to back-to-school '26, now we're starting to get to a point where we believe there's enough scale. We're getting very close to 51% with each quarter and that's where we believe we can start seeing positive trends. Certainly, as we get to holiday '26 and into '27 but you're spot on. It should get better with each passing quarter as we get towards holiday of this year and event periods.

And within back-to-school, what percent of back-to-school selling in general happens in Q2 versus in Q3?

It's about half, a rough estimate.

And then lastly, this is for Carl, I'm going to miss you, Carl. But I've got to ask you and I'm going to follow up on the same question for Mark. Who do you think is better, the current Chief Merchandising Officer or the incoming Chief Merchandising Officer?

Well Sam, I'll put it this way. Since the incoming Chief Merchandising Officer is somebody I recruited 11 years ago and have been working with closely all that time, I believe there's potential for growth in the future.

Well, that's not -- I mean, I'm going to have a conversation because that's not an overwhelming -- there's potential either -- I mean -- all right. Well and then Mark same question.

Sam, let me say this. We are very -- I'm very excited to turn the reigns over to Tanya. We have -- we'll work very, very closely in the future. And I think she's going to do a terrific job. And the team here really is excited and supports her 100%.

Well, when I met her, I thought she had more support than you but now I'm not really sure.

And Mark, I asked you the same question.

I love the question, Sam, because I've been so fortunate. I've had the best Chief Merchant in the industry and so fortunate to work with Carl and like you, I'm going to miss him. And April 6, I have the next best chief merchant in the industry. And I think the vendor community talking to so many people is so supportive of where we've been and where Tanya is going to take it. Tanya is the absolute right person to bring this next vision to life as we transform the corporation. Tanya is going to be very aggressive about growth. She's going to be aggressive about building our relationship, taking it from strength to strength but a new thing as we go after higher-income customers with half of the corporation or more and go after getting the best brands at premium prices, Tanya is going to be -- we've got great confidence in her and so does our vendor community. So I've been fortunate, two great chief merchants, one retiring after 50 years and one just about to start.

All right. I'm just going to throw one more in for Patrick. Again, a follow-up to Mitchel's question on the gross margin. I mean, how do we think about the gross margin from the BD&O and the merge? Because I mean, I assume that Q1's gross margin is going to be down quite a bit reflective of Q4, again, because of the -- mostly because of the BD&O. Is that the right way to think about it?

Sam, with respect to our overall concept on just talking about the year and the full guide on margins. At the midpoint, we would expect some deleverage because our sales are expected down. There is a commitment in our process for what we see right now, assuming that everything holds on tariffs and on consumer confidence and on the general basis of market conditions right now that we would expect a margin above 35% for the whole year with some deleverage on the BD&O and some stability in our merchandise margins. And in the quarter, the expectation would be the same but there would be a little bit more deleverage because the sales are planned down a little bit more.

And that would also be true at the end of Q3 going into Q4 because of the store because of the store redos but offset by the new store -- you get offset by the new stores being -- the stores that were converted earlier in the year which you don't get right now. Is that right?

That is correct. That is a fair assessment, Sam.

There are no more questions. I will now turn the conference back over to Mark Worden for closing remarks.

Thank you all so much for joining us today. 2024 was a tough year in the market but I want to thank our vendors, our team for achieving growth in sales, growth in profits and a bulletproof balance sheet where we started the year with no debt, ended the year with no debt. And I really like where we start 2025. It's volatile without a doubt, as we talked through but we have a strategic plan here to rapidly move from under 10% of our company with our growth banner to over half of our company marketed and engaging with our customers with our growth banner in just 24 months. The profit accretion that comes from this investment and the payback are fast, they're high and we've got a great enthusiasm from the vendor community to help us continue to bring the most distinct family footwear brand to the market. So, thank you so much and I really look forward to talking to you all again at Q1 about early insights from the rollout and how we're progressing. Best wishes to talk to you soon.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.