Shoe Carnival Rockets Higher, Short Squeeze in Play
Shares of Shoe Carnival (NASDAQ: SCVL) are rocketing higher on a combination of factors that we see driving the price action back to the recently set all-time highs. Not only is there a whopping 16% short-interest and short-squeeze in play but the company’s results and outlook are well above consensus. This has the stock firing a strong, trend-following signal on the weekly charts that may well take the market up to a new all-time high before the momentum is played. By then we expect to have heard more good news to send this undervalued, dividend-growing, share-repurchasing growth story up to even higher highs.
Shoe Carnival Is More Than A Pandemic Play
Shoe Carnival has certainly benefited from the pandemic but there is far more to the story than that. Start with a solid company, forward-looking management, and a shift toward digital and there is a recipe for long-term success that is already paying off. The company reported $313.37 million for the 4th quarter of fiscal 2021 to set a quarterly record and cap off a record-setting year. The revenue is up 23.4% on top of last year’s 6% gain and is evidence not only of strength but of strengthening as well, and it beat the Marketbeat.com consensus by 700 basis points. On a comp basis, sales are up 18% and aided by strong results in the eCommerce channels.
Moving down to the income, the company reported a significant widening of margins, and reported margins could have been even better. The gross margin improved by 650 basis points to 37.3% and includes more than 100 basis points of impact from one-time charges related to acquisitions. Those charges will not be present in future quarters but revenue growth and earnings leverage will be. Margin gains were driven by strong sell-through of products, pricing, and diminished promotional activity as has been the trend over the last year.
Turning to the guidance, the company is looking for revenue to grow 4% to 7% on top of the 36% posted for fiscal 2021. That range puts revenue at $1.384 billion compared to the $1.35 billion Marketbeat.com consensus estimate and there are margins gains in the forecast too. Operating income is expected to be up YOY and over 200% in the 2-year stack with EPS of $3.80 at the low end of the range compared to the consensus of $3.63.
“Our strategic investments, and recent acquisition of a second retail banner, have us positioned very well for continued sales growth in 2022, and for rapid store expansion in the years ahead. We now expect to sustain operating income and EPS levels that are more than double the pre-pandemic record levels set in fiscal 2019.”
Shoe Carnival Raises Its Dividend 30%
Shoe Carnival is on our watchlist for its dividend and dividend growth outlook as well as its business. The company doesn’t pay a large distribution but it is a very safe one and cheap at only 6X earnings. The company upped the payment for the 8th consecutive year with the Q4 release and it is a large one at that. The increase is worth 30% to shareholders and brings the yield up to 1.15% and near the broad market average. As for safety, the payout is only 5% of earnings and the balance sheet is a fortress.
The Technical Outlook: Shoe Carnival Confirms Support
Shares of Shoe Carnival popped more than 8% in the wake of the earnings report but price action is pulling back from the highest levels. The pop confirms support at the key $33.75 level but price action may pull back to close the gap formed by the post-release action before it moves higher. Longer-term, we expect to see this stock trend back to retest the all-time high and then move higher on growth, earnings, dividends, dividend growth, and share repurchases.