ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations (the “MD&A”) should be read together with our consolidated financial statements and notes to those statements included in PART II, ITEM 8 of this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses Fiscal 2025 and Fiscal 2024 and year-over-year comparisons between Fiscal 2025 and Fiscal 2024. A discussion of Fiscal 2024 and year-over-year comparisons between Fiscal 2024 and Fiscal 2023 that are not included in this Annual Report on Form 10-K can be found in PART II, ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year ended February 1, 2025, filed with the SEC on March 21, 2025. At the end of this section of this Annual Report on Form 10-K, we have included historical data for the past five fiscal years to facilitate trend analysis of key data reported in our consolidated financial statements and other select operating data.
Overview of Our Business
Shoe Carnival, Inc. is one of the nation’s largest omnichannel sellers of footwear for the family, and our goal is to be the leading family footwear retailer in the United States. Our product assortment, whether shopping in a physical store or through our e-commerce sales channel, is primarily branded footwear and includes dress and casual shoes, sandals, boots, work, and a wide assortment of athletic shoes. We carry shoes in two general categories – athletics and non-athletics with subcategories for men’s, women’s and children’s and we also carry certain accessories. In addition to our physical stores, through our e-commerce sales channel, customers can purchase the same assortment of merchandise in all categories of footwear with expanded options in certain instances. During Fiscal 2025, we operated two banners: Shoe Carnival and Shoe Station. For a description of these two banners, including the in-store environment, target customer and product assortment, see PART I, ITEM 1 of this Annual Report on Form 10-K.
As of our Fiscal 2025 year end, we operated 426 stores across 35 states and Puerto Rico, consisting of 144 Shoe Station locations and 282 Shoe Carnival locations. As more fully described in PART I, ITEM 1 of this Annual Report on Form 10-K, at the end of Fiscal 2025, Shoe Station bannered stores represented approximately 34% of our total store fleet, compared to approximately 10% at the end of Fiscal 2024. During Fiscal 2025, we rebannered 101 stores into Shoe Station stores, consisting of 73 Shoe Carnival stores and all 28 Rogan’s stores.
On November 13, 2025, we announced that our Board of Directors unanimously approved changing our corporate name to Shoe Station Group, Inc., subject to shareholder approval at our Annual Meeting of Shareholders in June 2026. That proposed name change remains on the June 2026 agenda. The proposed corporate name change to Shoe Station Group, Inc. reflects the Board’s conviction that the Shoe Station concept is our primary long-term growth vehicle.
Store Portfolio and Our Banner Strategy
The following tables set forth our physical store count for Fiscal 2025 and Fiscal 2024, as impacted by store rebanners, acquisitions, store openings and store closures.
January 31, 2026
Beginning
Permanently
End of
Banner
of Period
Opened
Acquired
Closed
Rebannered
Period
Shoe Carnival
Shoe Station
Rogan's
February 1, 2025
Beginning
Permanently
End of
Banner
of Period
Opened
Acquired
Closed
Rebannered
Period
Shoe Carnival
Shoe Station
Rogan's
As stated above, during Fiscal 2025, we rebannerd 101 stores into Shoe Station stores. Over time this rebanner strategy has evolved. Previous expectations were that approximately 70 additional stores would rebanner before Back-to-School in Fiscal 2026, with the Shoe Station stores then representing 51% of the current store fleet, and that over 90% of our fleet would operate as a Shoe Station store by the end of Fiscal 2028, with remaining locations to be evaluated for potential rebannering, outlet repositioning, or closure. This transition to substantially all Shoe Station stores was expected to generate both inventory reductions, as Shoe Station’s merchandising model requires less inventory per store, as well as cost savings from reduced dual-brand complexity across merchandising, marketing, systems, supply chain and back office.
In evaluating the performance of the 101 stores that were rebannered in Fiscal 2025, particularly Net Sales in the second-half of Fiscal 2025, we observed that, while Shoe Station's e-commerce results have been a meaningful contributor to banner-level sales growth, demonstrating strong consumer response to the Shoe Station brand and assortment online, there was significant variability in in-store sales performance across rebannered locations, with some stores performing well and others not achieving anticipated results.
As a result, we made the strategic decision to slow the pace of store rebanners in Fiscal 2026 from previously announced timelines to allow time to identify which consumer demographics are responding most favorably to the Shoe Station format, to determine which marketing channels are most effective in driving new customer acquisition, and to refine product mix in rebannered stores to improve in-store conversion. We now expect to rebanner approximately 21 stores during the first half of Fiscal 2026 while this evaluation is conducted.
The Shoe Station banner is expected to continue as our primary growth banner as we leverage our CRM customer data to identify opportunities both within our current markets as well as new markets outside of our current footprint that are best suited for the Shoe Station format.
However, in markets where Shoe Carnival has historically been a dominant family footwear retailer, those stores will continue to operate under the Shoe Carnival banner. The Shoe Carnival banner continues to serve an important customer base in a meaningful number of locations, and we expect to manage both banners accordingly.
Net Sales by Banner
For the past three fiscal years, Shoe Station has been a market leader in the Southeast, and, according to our view of available industry data, Shoe Station has been the fastest growing retailer in our industry in terms of Net Sales growth. During the same period, our Shoe Carnival banner and the family footwear industry experienced comparable stores Net Sales declines.
Net Sales from our Shoe Station banner grew from $99.9 million in Fiscal 2022 (the first full year of our ownership) to $236.7 million in Fiscal 2025 (excluding Net Sales from Rogan’s, which are discussed below). This increase included Net Sales growth of 4.5% in Fiscal 2023, 6.4% in Fiscal 2024, and 2.7% in Fiscal 2025 from both new stores and comparable store Net Sales increases. The remaining increase resulted from base Net Sales that were transferred from Shoe Carnival as stores rebannered.
Conversely, Net Sales from our Shoe Carnival banner declined from $1.161 billion in Fiscal 2022 to $821.8 million in Fiscal 2025. This decrease included Net Sales declines of 7.8% in Fiscal 2023, 5.7% in Fiscal 2024, and 7.7% in Fiscal 2025 from both net store closures and comparable store Net Sales declines. The remaining decrease resulted from base Net Sales that were transferred to Shoe Station as stores rebannered.
With respect to Net Sales transferred between banners, we categorize Net Sales generated from a rebannered store as Shoe Station Net Sales beginning in the month following the month the store rebanners. Net Sales in Fiscal 2024 and Fiscal 2025 that were transferred from Shoe Carnival to Shoe Station totaled $7.6 million and $111.3 million, respectively. Approximately $149 million of Net Sales were reported as Shoe Carnival and Rogan’s Net Sales until they were rebannered in Fiscal 2025. In Fiscal 2026, those Net Sales will be reported under the Shoe Station banner for the entirety of the year.
Rogan’s Net Sales were $75.6 million in Fiscal 2025 and $80.3 million in Fiscal 2024. During Fiscal 2025, we transitioned to a more profitable Net Sales approach at Rogan’s, which resulted in Rogan’s generating more product margin in Fiscal 2025 compared to Fiscal 2024, despite the lower Net Sales. With integration fully complete and synergies captured, we expect to no longer separate Rogan’s Net Sales from Shoe Station Net Sales beginning in Fiscal 2026.
Comparable Stores Net Sales
Comparable stores Net Sales is a key performance indicator for us. Comparable stores Net 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, remodeled or rebannered. Therefore, stores recently opened, acquired or permanently closed are not included in comparable stores Net Sales. We generally include e-commerce sales in our comparable stores Net 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. Rogan’s comparable stores Net Sales were included in our comparable stores Net Sales quarterly calculations beginning in the thirteen weeks ended August 2, 2025 and will begin to be included in our comparable stores Net Sales annual calculations beginning in Fiscal 2026.
Fiscal 2025 Executive Summary
Our Fiscal 2025 Net Income was $52.3 million, or $1.90 per diluted share, and was lower than the $73.8 million, or $2.68 per diluted share, reported in Fiscal 2024. We estimate our Fiscal 2025 Net Income per Diluted Share decreased by approximately $0.66 as a result of our rebanner-related investment, as more fully described below. The decline in Net Income per Diluted Share was also impacted by certain tax credits and other benefits associated with the Rogan’s acquisition that totaled $0.19 in Fiscal 2024 and did not recur in Fiscal 2025. Our Net Income per Diluted Share otherwise increased $0.07 year over year before the impact of these prior year Rogan’s acquisition related benefits and Fiscal 2025 rebanner investments.
Our Net Sales declined 5.6% in Fiscal 2025 compared to Fiscal 2024, primarily due to a 7.7% decline in Net Sales at our Shoe Carnival banner as we maintained pricing discipline despite pressure on lower-income consumers and reduced promotional marketing. In contrast, our Shoe Station banner achieved Net Sales growth of 2.7% in Fiscal 2025 compared to Fiscal 2024, driven by our rebanner strategy, including omnichannel growth. Therefore, our Shoe Station banner’s Net Sales growth in Fiscal 2025 compared to Fiscal 2024 outperformed Shoe Carnival’s Net Sales decline by 10.4 percentage points.
Our comparable stores Net Sales also declined 5.6% and included comparable stores Net Sales growth in Back-to-School August. Our Shoe Station banner grew comparable stores Net Sales low single digits in Fiscal 2025, while comparable stores Net Sales at our Shoe Carnival banner declined high-single digits and was the primary driver of our overall comparable stores Net Sales decline.
We achieved a Gross Profit margin of 36.6%, up 100 basis points from Fiscal 2024 and above 35% for the fifth consecutive year. The increase included a 180 basis point increase in our merchandise margin, driven by disciplined pricing across all banners, a favorable mix shift toward Shoe Station’s higher income customers and deliberate inventory management decisions made in anticipation of tariff cost increases that are expected to fully impact Fiscal 2026. This increase was reduced by 80 basis points from buying, distribution and occupancy costs primarily due to deleverage on lower Net Sales.
Our Operating Income declined $24.4 million in Fiscal 2025 compared to Fiscal 2024. We estimate our Fiscal 2025 Operating Income declined approximately $24.1 million, or $0.66 per diluted share compared to Fiscal 2024 as a result of rebanner-related investment due to lost sales during a four-to-six-week store closure period through each store’s grand opening, store closing costs and asset write-offs, additional depreciation of new store construction costs, customer acquisition costs and other costs. This rebanner investment resulted in an approximate 0.5% reduction in Net Sales due to lost sales and an approximate 2.0% increase in our Selling, General and Administrative Expenses (“SG&A”) as a percent of Net Sales. Capital expenditures supporting the rebanner initiative totaled approximately $37.1 million in Fiscal 2025.
Fiscal 2025 marked the 21st consecutive fiscal year we ended with no debt. In each of the last five years, we have funded our operations and growth investments, including our acquisitions of Shoe Station and Rogan’s and our current
year rebanner and inventory investments, without drawing on our credit facility. We ended Fiscal 2025 with $130.7 million of Cash, Cash Equivalents and Marketable Securities, up 6% compared to the end of Fiscal 2024 and $99.0 million of available borrowings under our existing credit facility to fund our growth objectives. Cash flows from operations in Fiscal 2025 totaled $71.3 million.
Our Merchandise Inventories at the end of Fiscal 2025 were $439.6 million, up approximately 14% compared to the end of Fiscal 2024. We increased our inventory positions this year, taking advantage of opportunistic buys for seasonal and in-demand merchandise. This strategy improved availability of key merchandise and drove margin expansion in Fiscal 2025. We anticipate declines in Merchandise Inventories in Fiscal 2026 in a range of $50 to $65 million, as we expect to sell the remaining opportunistic pre-tariff and in-demand product purchased in Fiscal 2025 and increase promotional activity to work through excess inventory not part of our ongoing assortment, including legacy Shoe Carnival inventory, that will no longer be required as more Shoe Carnival stores rebanner. The promotional activity necessary to sell this inventory is expected to reduce gross profit margins in Fiscal 2026 compared to the 36.6% gross profit margin achieved in Fiscal 2025.
Results of Operations
The following table sets forth our results of operations expressed as a percentage of Net Sales for the following fiscal years:
Net sales
Cost of sales (including buying, distribution, and
occupancy costs)
Gross profit
Selling, general and administrative expenses
Operating income
Interest and other income
Interest expense
Income before income taxes
Income tax expense
Net income
Fiscal 2025 Compared to Fiscal 2024
Net Sales
Net Sales were $1.135 billion during Fiscal 2025, a decrease of $67.6 million, or 5.6%, compared to Fiscal 2024. The decrease was primarily due to a 7.7% Net Sales decline at our Shoe Carnival banner, as we maintained pricing discipline despite pressure on lower-income consumers and reduced promotional marketing. This decrease was partially offset by continued growth from our Shoe Station banner, which contributed a 2.7% increase in Net Sales compared to Fiscal 2024. Our 5.6% comparable stores Net Sales decline included an approximate 13% decrease in units sold, partially offset by pricing increases. Our Shoe Carnival banner comparable stores Net Sales declined high-single digits, while our Shoe Station banner comparable stores Net Sales increased low-single digits. E-commerce sales were approximately 10% of merchandise sales in both Fiscal 2025 and Fiscal 2024.
Gross Profit
Gross Profit was $415.2 million in Fiscal 2025, a decrease of $13.6 million compared to Fiscal 2024. Gross profit margin in Fiscal 2025 was 36.6% compared to 35.6% in Fiscal 2024. The 100 basis point increase in gross profit margin was driven by a 180 basis point increase in merchandise margin due to disciplined pricing, favorable mix shift toward Shoe Station's higher-income consumer, and deliberate inventory management decisions made in anticipation of tariff cost increases that are expected to fully impact Fiscal 2026. This increase was partially offset by 80 basis points from buying, distribution and occupancy costs, primarily due to deleveraging on lower Net Sales in Fiscal 2025 compared to Fiscal 2024.
Selling, General and Administrative Expenses
SG&A increased $10.8 million in Fiscal 2025 to $348.4 million compared to $337.6 million in Fiscal 2024. The increase was due primarily to expenses associated with our rebanner strategy, partially offset by decreases in selling expenses impacting our other stores in Fiscal 2025 compared to Fiscal 2024. As a percent of Net Sales, SG&A were 30.7% in Fiscal 2025 compared to 28.0% in Fiscal 2024, with the increase being due primarily to the rebanner costs incurred in Fiscal 2025, which increased SG&A as a percent of Net Sales by approximately two percentage points, and deleveraging from lower Net Sales outpacing cost control measures.
Interest and Other Income and Interest Expense
Changes in our Interest and Other Income and our Interest Expense decreased our Income Before Income Taxes by $2.7 million in Fiscal 2025 compared to Fiscal 2024. This decrease was primarily due to pandemic-related tax credits of $3.0 million recognized in Fiscal 2024 associated with our acquisition of Rogan's, partially offset by higher interest earned on invested cash balances.
Income Taxes
The effective income tax rate for Fiscal 2025 was 25.7% compared to 24.3% for Fiscal 2024. The higher effective tax rate in Fiscal 2025 compared to Fiscal 2024 was due to discrete adjustments related to share-settled equity awards and favorable impacts recognized in Fiscal 2024 associated with our acquisition of Rogan’s.
Liquidity and Capital Resources
Our primary sources of liquidity are $130.7 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of Fiscal 2025, cash generated from operations and availability under our $100 million Credit Agreement. 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 rebanners and 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 have also pursued strategic acquisitions of other footwear retailers.
Cash Flow - Operating Activities
Net cash generated from operating activities was $71.3 million in Fiscal 2025 compared to $102.6 million during Fiscal 2024. The decrease in operating cash flow was primarily driven by increased inventory purchases and the reduction in Net Income as a result of costs incurred to support our rebanner strategy.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the "OBBB"). The OBBB made key elements of the Tax Cuts and Jobs Act permanent, including 100% bonus depreciation and domestic research cost expensing. We estimate that the OBBB decreased our cash paid for taxes in Fiscal 2025 by approximately 30%. There was no material change in our effective income tax rate for Fiscal 2025 as a result of the OBBB.
Working capital increased on a year-over-year basis and totaled $437.7 million at January 31, 2026 compared to $405.7 million at February 1, 2025. The increase was primarily attributable to higher Merchandise Inventories and a higher cash balance, partially offset by higher Accounts Payable. Our current ratio was 3.8 as of January 31, 2026, compared to 4.1 as of February 1, 2025.
Cash Flow - Investing Activities
Our cash outflows for investing activities are normally for capital expenditures. During Fiscal 2025 and Fiscal 2024, we expended $44.7 million and $33.2 million, respectively, for the purchases of property and equipment, primarily related to rebanners, store remodels, and opening five new Shoe Station stores over both fiscal years.
Our Rogan’s acquisition in first quarter 2024 resulted in the payment of cash consideration of $44.8 million, net of cash acquired, in Fiscal 2024. Additional information regarding the Rogan’s acquisition, including information on the additional contingent consideration of up to $5.0 million, can be found in Note 3 — “Acquisition of Rogan Shoes”
in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.
We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our non-qualified deferred compensation plan. The balance of these Marketable Securities was $13.6 million at January 31, 2026, compared to $14.4 million at February 1, 2025. Additional information can be found in Note 4 — “Fair Value of Financial Instruments” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K.
Cash Flow - Financing Activities
Our cash outflows for financing activities are typically for cash dividend payments, share repurchases or payments on our Credit Agreement. 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 Agreement.
During Fiscal 2025, net cash used in financing activities was $18.9 million compared to $15.3 million during Fiscal 2024. The increase in net cash used in financing activities was primarily due to the increase in dividend payments and shares surrendered by employees to pay taxes on stock-based compensation awards. During Fiscal 2025 and Fiscal 2024, we did not borrow or repay funds under our Credit Agreement. Letters of credit outstanding were $1.0 million at January 31, 2026, and our borrowing capacity was $99.0 million. We also did not repurchase any shares under our share repurchase program in either Fiscal 2025 or Fiscal 2024.
Our Credit Agreement requires us to maintain compliance with various financial covenants. See Note 10 – “Debt” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for a further discussion of our Credit Agreement and its covenants. We were in compliance with these covenants as of January 31, 2026.
Store Rebanners, Openings and Closings
We ended Fiscal 2025 with 426 stores, comprised of 282 Shoe Carnival stores and 144 Shoe Station stores. During Fiscal 2025, we rebannered 101 stores, consisting of 73 Shoe Carnival stores and all 28 Rogan’s stores. During Fiscal 2025, we opened one new Shoe Station store and permanently closed five Shoe Carnival stores. We believe our current Shoe Station store footprint provides for growth in new markets within the United States as well as fill-in opportunities within existing markets.
We expect to rebanner approximately 21 stores during the first half of Fiscal 2026, increasing the number of our Shoe Station stores to 165 by Back-to-School in Fiscal 2026, representing 39% of our current store base. We expect a reduction in our Fiscal 2026 Operating Income of $10 to $15 million for continued rebanner investment to support stores rebannered in Fiscal 2025 and those that are planned to rebanner in Fiscal 2026, inclusive of expected lower margins to work through excess inventory as more stores rebanner. We anticipate additional capital expenditures in Fiscal 2026 of between $5 to $7 million to support the rebanner initiative. Though impacting near-term profitability and liquidity, we expect these investments will position us for more sustainable future performance.
Increasing market penetration by adding new stores is also a key component of our long-term growth strategy. We do not anticipate opening any new stores in Fiscal 2026 given our focus on rebannering and pursing acquisitions. Future store growth may also be impacted by macroeconomic uncertainty, and our ability to identify desirable locations and/or acquisition partners. We expect limited store closures over the next several years.
Capital Expenditures – Fiscal 2026
Capital expenditures for Fiscal 2026 are expected to be between $12 million and $18 million, inclusive of the $5 million to $7 million related to rebanner activity. The resources allocated to projects are subject to near-term changes depending on potential inflationary, supply chain and other macroeconomic impacts. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, rebannered, relocated and remodeled, and the amount of lease incentives, if any, received from landlords. 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.
Dividends
During Fiscal 2025, four quarterly cash dividends of $0.15 per share were approved and paid. In Fiscal 2024, we paid four quarterly cash dividends of $0.135 per share. During Fiscal 2025 and Fiscal 2024, we returned $16.7 million and $14.7 million, respectively, in cash to our shareholders through our quarterly 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, subject to the restrictions in our Credit Agreement. See Note 10 – “Debt” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for a further discussion of our Credit Agreement and its restrictions.
Share Repurchase Program
On December 10, 2025, our Board of Directors authorized a share repurchase program for up to $50 million of our outstanding common stock, effective January 1, 2026 (the “2026 Share Repurchase Program”). The purchases may be made in the open market or through privately negotiated transactions from time to time through December 31, 2026 and in accordance with applicable laws, rules and regulations. The 2026 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, the share repurchase program 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, subject to the restrictions in our Credit Agreement. See Note 10 – “Debt” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for a further discussion of our Credit Agreement and its restrictions.
The 2026 Share Repurchase Program replaced a $50 million share repurchase program that was authorized in December 2024, became effective January 1, 2025 and expired in accordance with its terms on December 31, 2025. No shares were repurchased during Fiscal 2025 or Fiscal 2024.
Leases
Rent-related payments made in Fiscal 2025 totaled $98.1 million. As we are contractually obligated to make lease payments to landlords, estimated future payments to landlords and lease-related charges are expected to be significant in future years and will increase in future years due to expected organic and acquired store growth. These payments include estimates for fixed minimum and contingent rent, estimated reimbursements to landlords for common area maintenance, taxes and insurance and other occupancy related charges. See Note 11 – “Leases” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for further discussion of our lease obligations.
Impact of Store Count and Seasonality on Quarterly Results
Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores.
(Unaudited, in thousands, except per share amounts)
Fiscal 2025
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Net sales
Gross profit
Operating income
Net income
Net income per share – Diluted (1)
Fiscal 2024
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Net sales
Gross profit
Operating income
Net income
Net income per share – Diluted (1)
(1) Per share amounts are computed independently for each of the quarters presented. For per share amounts, the sum of the quarters may not equal the total year due to the impact of changes in weighted shares outstanding and differing applications of earnings as prescribed by accounting guidance.
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 could reduce our Net Sales and Gross Profit and negatively affect our profitability.
Store Count
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. As part of our long-term growth strategy, we expect to pursue opportunities for store growth across large and mid-size markets as we continue to leverage customer data from our CRM program and more attractive real estate options become available.
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. 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.
Non-capital expenditures, such as advertising and payroll incurred prior to the opening of a new store, are charged to expense as incurred. The timing and actual amount of expense recorded in closing an individual store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the amount of any lease buyout. Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur store closing costs related to the closure of existing stores.
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. The accounting policies that require more significant judgment are included below.
Merchandise Inventories – Our Merchandise Inventories are stated at the lower of cost or net realizable value as of the balance sheet date and consist primarily of dress, casual and athletic footwear for women, men and children. The
cost of our merchandise is determined using the first-in, first-out valuation method (“FIFO”). For determining net realizable value, we estimate the future demand and related sale price of merchandise in our inventory. The stated value of Merchandise Inventories contained on our Consolidated Balance Sheets also includes freight, certain capitalized overhead costs and reserves.
Factors considered when we review our inventory to properly state it at lower of cost or net realizable value include recent sale prices, historical loss rates, the length of time merchandise has been held in inventory, quantities of the various styles held in inventory, seasonality of the merchandise, expected consideration to be received from our vendors and current and expected future sales trends. We also review aging trends, which include the historical rate at which merchandise has sold below cost and the value and nature of merchandise currently held in inventory and priced below original cost. We reduce the value of our inventory to its estimated net realizable value where cost exceeds the estimated future selling price. Merchandise Inventories as of January 31, 2026 totaled $439.6 million, representing approximately 37% of total assets. Merchandise Inventories as of February 1, 2025 totaled $385.6 million, representing approximately 34% of total assets. Given the significance of inventories to our consolidated financial statements, the determination of net realizable value is a critical accounting estimate. Material changes in the factors noted above could have a significant impact on the actual net realizable value of our inventory and our reported operating results.
Valuation of Long-Lived Assets – Long-lived assets, such as Property and Equipment subject to depreciation and right-of-use assets arising from our leased properties, are evaluated for impairment on a periodic basis if events or circumstances indicate the carrying value may not be recoverable. This evaluation includes performing an analysis of the estimated undiscounted future cash flows of the long-lived assets. Assets are grouped and the evaluation performed at the lowest level for which there are identifiable cash flows, which is generally at a store level.
If the estimated future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between the estimated fair value and the carrying value. We estimate the fair value of our long-lived assets using store-specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our assumptions and estimates used in the evaluation of impairment, including current and future economic trends for stores, are subject to a high degree of judgment. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in SG&A. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.
Valuation of Goodwill and Intangible Assets – Our indefinite-lived assets include Goodwill and non-amortizing Intangible Assets (trade names) resulting from the acquisitions of Shoe Station in Fiscal 2021 and Rogan's in Fiscal 2024. Goodwill represents the purchase price in excess of fair values assigned to the underlying identifiable net assets of the acquired business. Goodwill and indefinite-lived Intangible Assets are reviewed annually for impairment unless circumstances dictate the need for more frequent assessment. We perform our annual impairment testing as of the first day of the fourth fiscal quarter.
Goodwill is reviewed for impairment at our single reporting unit level. We have the option to either first perform a qualitative assessment to determine whether it is “more likely than not” that the reporting unit's fair value is less than its carrying value, or to proceed directly to the quantitative assessment, which requires a comparison of the reporting unit's fair value to its carrying value. Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, expense factors, overall financial performance, entity specific and reporting unit events, capital markets and pricing and breakeven multiples. If we determine that the fair value of our reporting unit is less than its carrying value, we recognize an impairment charge equal to the difference, not to exceed the total amount of goodwill allocated to the reporting unit. In performing an impairment test for our Goodwill in Fiscal 2025, we completed the qualitative assessment on November 2, 2025. We determined that it was not “more likely than not” that the fair value of our reporting unit was less than the carrying value; therefore, no quantitative assessment was performed and no impairment was recorded.
With respect to the Shoe Station and Rogan’s trade names, we elected to bypass the qualitative assessment and performed a quantitative assessment in Fiscal 2025 for each trade name. In the current year, revenue supporting the Rogan’s trade name included Rogan’s stores that were co-branded as “Shoe Station at Rogan’s” and the business-to-business operations solely branded as “Rogan’s Work.” These stores and business-to-business operations continue to
broadly use the Rogan’s trade name. Both the Shoe Station and Rogan’s data sets were assessed using respective revenue growth, discount rate and royalty rate assumptions. Significant changes in our estimates and assumptions could affect our fair value calculations. We performed these assessments on November 2, 2025 and our estimate of fair values exceeded the carrying amounts; therefore, no impairments were recorded.
Leases – We lease our retail stores, our Evansville distribution center and our corporate headquarters in Fort Mill, South Carolina. We also enter into leases of equipment and other assets. Substantially all of our leases are operating leases. Therefore, how operating leases are recognized throughout the financial statements in accordance with applicable accounting guidance can have a significant impact on our financial condition and results of operations and related disclosures.
In accordance with Accounting Standards Codification Topic No. 842 – Leases , on the lease commencement date we recognize a right-of-use asset for the right to use a leased asset and a liability based on the present value of remaining lease payments over the lease term. The weighted average discount rate utilized in Fiscal 2025 and Fiscal 2024 was 5.1% and 4.7%, respectively.
For new leases, renewals or amendments and when we make material investments in leased properties pursuant to our rebanner strategy or other modernization investments, we make certain estimates and assumptions regarding property values, market rents, property lives, discount rates and probable terms. These estimates and assumptions can impact: (1) lease classification and the related accounting treatment; (2) rent holidays, escalations or deferred lease incentives, which are taken into consideration when calculating straight-line expense; (3) the term over which leasehold improvements for each store are amortized; and (4) the values and lives of adjustments to initial and modified right-of-use assets. The amount of amortized rent expense would vary if different estimates and assumptions were used.
Our real estate leases typically include options to extend the lease or to terminate the lease at our sole discretion. Options to extend real estate leases typically include one or more options to renew, with renewal terms that typically extend the lease term for five years or more. Many of our leases also contain “co-tenancy” provisions, including the required presence and continued operation of certain anchor tenants in the adjoining retail space. If a co-tenancy violation occurs, we have the right to a reduction of rent for a defined period after which we have the option to terminate the lease if the violation is not cured. In addition to co-tenancy provisions, certain leases contain “go-dark” provisions that allow us to cease operations while continuing to pay rent through the end of the lease term. When determining the lease term, we include options that are reasonably certain to be exercised.
Income Taxes – As part of the process of preparing our consolidated financial statements, we are required to estimate our current and future income taxes for each tax jurisdiction in which we operate. Significant judgment is required in determining our annual tax expense and evaluating our tax positions. As a part of this process, deferred tax assets and liabilities are recognized based on the difference between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Our temporary timing differences relate primarily to inventory, property and equipment, right-of-use assets, operating lease liabilities, goodwill and non-amortizing intangible assets. Deferred tax assets and liabilities are measured using the tax rates enacted and expected to be in effect in the years when those temporary differences are expected to reverse. Deferred tax assets are reduced, if necessary, by a valuation allowance to the extent future realization of those tax benefits are uncertain.
We are also required to make many subjective assumptions and judgments regarding our income tax exposures when accounting for uncertain tax positions associated with our income tax filings. We must presume that taxing authorities will examine all uncertain tax positions and that they have full knowledge of all relevant information. However, interpretations of guidance surrounding income tax laws and regulations are often complex, ambiguous and frequently change over time, and a number of years may elapse before a particular issue is resolved. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in our consolidated financial statements. Although we believe we have no uncertain tax positions, tax authorities could assess tax liabilities in open tax periods not presently foreseen.
Recent Accounting Pronouncements
See Note 2 — “Summary of Significant Accounting Policies” in our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements and related impacts.
Historical Financial and Operating Data
The following historical financial data is included for the convenience of assessing trends in our financial condition and results of operations over the previous five fiscal years. A more detailed description of the fluctuations among Fiscal 2021 – Fiscal 2024 can be found in our Annual Reports on Form 10-K filed for those previous fiscal years.
(In thousands, except per share and operating data)
Fiscal years (1)
Income Statement Data:
Net sales
Gross profit
Operating income
Net income
Diluted net income per share
Dividends declared per share
Balance Sheet Data:
Cash and cash equivalents
Total assets
Long-term debt
Total shareholders’ equity
Operating Data:
Stores open at end of year
Comparable stores net sales (2)(3)
Square footage of store space at year
end (000’s)
Average sales per store (000’s) (2)(4)(6)
Average sales per square foot (2)(5)(6)
(1) Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Unless otherwise stated, references to years 2025, 2024, 2023, 2022 and 2021 relate respectively to the fiscal years ended January 31, 2026, February 1, 2025, February 3, 2024, January 28, 2023 and January 29, 2022. Fiscal 2023 consisted of 53 weeks and fiscal years 2025, 2024, 2022 and 2021 all consisted of 52 weeks.
(2) Selected Operating Data for Fiscal 2023 has been adjusted to a comparable 52-week period ended January 27, 2024. The 53rd week in Fiscal 2023 caused a one-week shift in our fiscal calendar. To minimize the effect of this fiscal calendar shift on comparable stores Net Sales, our reported annual comparable stores Net Sales results for Fiscal 2023 compare the 52-week period ended January 27, 2024 to the 52-week period ended January 28, 2023, and our comparable stores Net Sales results for fiscal 2024 compare the 52-week period ended February 1, 2025 to the 52-week period ended February 3, 2024.
(3) Comparable stores Net Sales for the periods indicated include stores that have been open for 13 full months after such stores’ acquisition or grand opening prior to the beginning of the period, including those stores that have been rebannered, relocated or remodeled. Therefore, stores opened, acquired or closed during the periods indicated are not included in comparable stores Net Sales. We include e-commerce sales in our comparable stores Net Sales. Due to our omnichannel retailer strategy, we view e-commerce sales as an extension of our physical stores.
(4) Average sales per store includes e-commerce sales in states with a physical store location.
(5) Average sales per square foot includes net e-commerce sales. We include e-commerce sales in our average sales per square foot 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.
(6) In fiscal year 2021 average sales per store and average sales per square foot include only Shoe Carnival banner stores.
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in that the interest payable on our credit agreement is based on variable interest rates and therefore is affected by changes in market rates. We do not use interest rate derivative instruments to manage exposure to changes in market interest rates. We had no borrowings under our credit agreement during Fiscal 2025.
ITEM 8. FINANCIAL STATEME NTS
The information required by this item follows Deloitte & Touche LLP’s audit opinion, which begins on the following page.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Shoe Carnival, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Shoe Carnival, Inc. and subsidiaries (the "Company") as of January 31, 2026, and February 1, 2025, the related consolidated statements of income, shareholders’ equity, and cash flows, for each of the three years in the period ended January 31, 2026, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2026, and February 1, 2025, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2026, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 26, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Merchandise Inventories — Refer to Note 2 to the financial statements
Critical Audit Matter Description
Merchandise inventories are stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. Factors considered in determining if inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, historical loss rates, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from vendors and current and expected future sales trends. The Company also reviews aging trends, which include the historical rate at which merchandise has sold below cost and the value and nature of merchandise currently held in inventory and priced below original cost. The Company reduces the value of inventory to its estimated net realizable value where cost exceeds the estimated future selling price.
Given the significant judgments made by management to estimate the net realizable value of inventory, such as expected consideration to be received from vendors and current and expected future sales trends, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the significant judgments made by management to determine net realizable value of inventory included the following procedures, among others:
We tested the operating effectiveness of the Company’s internal control over the valuation of inventory, including the review and determination of the anticipated net realizable value of merchandise inventories compared to the cost value of inventory on-hand.
We tested the recorded inventory reserve by developing an expectation for the amount of the inventory reserve and comparing our expectation to the amount recorded by management.
We evaluated the reasonableness of management’s determination of the net realizable value of inventory by:
Testing the accuracy of source data used in the calculation, including inventory on hand, historical losses by product category, sales prices and consideration received from vendors.
Recalculating the projected loss for inventory on hand based on the source data used in the calculation.
Making inquiries of management regarding current and expected future sales trends and evaluating external communications by analysts.
Evaluating management’s ability to accurately forecast future sales trends and inventory losses by comparing actual results to management’s historical forecasts.
/s/ Deloitte & Touche LLP
Indianapolis, Indiana
March 26, 2026
We have served as the Company's auditor since 1988.
Shoe Carnival, Inc.
Consolidated B alance Sheets
(In thousands, except share data)
January 31,
February 1,
Assets
Current Assets:
Cash and cash equivalents
Marketable securities
Accounts receivable
Merchandise inventories
Other
Total Current Assets
Property and equipment – net
Operating lease right-of-use assets
Intangible assets
Goodwill
Other noncurrent assets
Total Assets
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable
Accrued and other liabilities
Current portion of operating lease liabilities
Total Current Liabilities
Long-term portion of operating lease liabilities
Deferred income taxes
Deferred compensation
Other
Total Liabilities
Shareholders’ Equity:
Common stock, $ 0.01 par value, 50,000,000 shares authorized
and 41,049,190 shares issued in each period
Additional paid-in capital
Retained earnings
Treasury stock, at cost, 13,674,916 and 13,874,787 shares, respectively
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
See notes to consolidated financial statements.
Shoe Carnival, Inc.
Consolidated Stat ements of Income
(In thousands, except per share data)
January 31,
February 1,
February 3,
Net sales
Cost of sales (including buying, distribution and occupancy
costs)
Gross profit
Selling, general and administrative expenses
Operating income
Interest and other income
Interest expense
Income before income taxes
Income tax expense
Net income
Net income per share:
Basic
Diluted
Weighted average shares:
Basic
Diluted
See notes to consolidated financial statements.
Shoe Carnival, Inc.
Consolidated Statements of Shareholders’ Equity
(In thousands)
Common Stock
Issued
Treasury
Amount
Additional
Paid-In
Capital
Retained
Earnings
Treasury
Stock
Total
Balance at January 28, 2023
Dividends ($ 0.44 per share)
Employee stock purchase plan
purchases
Stock-based compensation
awards
Shares surrendered by
employees to pay taxes
on stock-based
compensation awards
Purchase of common stock for
Treasury
Stock-based compensation
expense
Net income
Balance at February 3, 2024
Dividends ($ 0.54 per share)
Employee stock purchase plan
purchases
Stock-based compensation
awards
Shares surrendered by
employees to pay taxes
on stock-based
compensation awards
Stock-based compensation
expense
Net income
Balance at February 1, 2025
Dividends ($ 0.60 per share)
Employee stock purchase plan
purchases
Stock-based compensation
awards
Shares surrendered by
employees to pay taxes
on stock-based
compensation awards
Stock-based compensation
expense
Net income
Balance at January 31, 2026
See notes to consolidated financial statements.
Shoe Carnival, Inc.
Consolidated Statem ents of Cash Flows
(In thousands)
January 31,
February 1,
February 3,
Cash Flows From Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Stock-based compensation
Loss (Gain) on retirement and impairment of assets, net
Deferred income taxes
Non-cash operating lease expense
Other
Changes in operating assets and liabilities:
Accounts receivable
Merchandise inventories
Operating lease liabilities
Accounts payable and accrued liabilities
Other
Net cash provided by operating activities
Cash Flows From Investing Activities
Purchases of property and equipment
Investments in marketable securities
Sales of marketable securities and other
Acquisition, net of cash acquired
Net cash used in investing activities
Cash Flows From Financing Activities
Proceeds from issuance of stock
Dividends paid
Purchase of common stock for treasury
Shares surrendered by employees to pay taxes on
stock-based compensation awards
Other
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Cash paid during year for interest
Cash paid during year for income taxes, net of refunds
Capital expenditures incurred but not yet paid
Dividends declared but not yet paid
Contingent consideration related to business acquisition
See notes to consolidated financial statements.
Shoe Carnival, Inc.
Notes to Consolidated Financial Statements
Note 1 – Organization and Description of Business
Our consolidated financial statements include the accounts of Shoe Carnival, Inc. and its wholly-owned subsidiaries Rogan Shoes, Incorporated (“Rogan’s”), SCHC, Inc. and Shoe Carnival Ventures, LLC, and SCLC, Inc., a wholly-owned subsidiary of SCHC, Inc. (collectively referred to as “we”, “our”, “us” or the “Company”). All intercompany accounts and transactions have been eliminated. We are one of the nation’s largest omnichannel family footwear retailers, selling footwear and related products through our retail stores located in 35 states within the continental United States and in Puerto Rico, as well as through our e-commerce sales channel.
Note 2 – Summary of Significant Accounting Policies
Fiscal Year
Our fiscal year is a 52/53 week year ending on the Saturday closest to January 31. Unless otherwise stated, references to years 2025, 2024 and 2023 relate to the fiscal years ended January 31, 2026 (“Fiscal 2025”), February 1, 2025 (“Fiscal 2024”) and February 3, 2024 (“Fiscal 2023”), respectively. Fiscal 2025 and Fiscal 2024 consisted of 52 weeks while Fiscal 2023 consisted of 53 weeks.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities as of the financial statement reporting date in addition to the reported amounts of certain revenues and expenses for the reporting period. The assumptions used by management in future estimates could change significantly due to changes in circumstances and actual results could differ from those estimates.
Cash and Cash Equivalents
We had Cash and Cash Equivalents of $ 117.1 million at January 31, 2026 and $ 108.7 million at February 1, 2025. Credit and debit card receivables and receivables due from a third party totaling $ 5.9 million and $ 6.9 million were included in cash equivalents at January 31, 2026 and February 1, 2025 , respectively. Credit and debit card receivables generally settle within three days ; receivables due from third parties generally settle within five business days.
We consider all short-term investments with an original maturity date of three months or less to be cash equivalents. As of January 31, 2026 and February 1, 2025 , all invested cash was held in money market mutual funds. While investments are not considered by management to be at significant risk, they could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to either invested cash or cash held in our bank accounts.
Fair Value Measurements
The accounting guidance related to fair value measurements defines fair value and provides a consistent framework for measuring fair value. Valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect market assumptions. This guidance only applies when other guidance requires or permits the fair value measurement of assets and liabilities. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Quoted prices in active or inactive markets for similar assets or liabilities that are either directly or indirectly observable; and
Level 3 – Significant unobservable inputs that are generally model-based valuation techniques such as discounted cash flows, based on the best information available, including our own data. Fair values of
our long-lived assets are estimated using an income-based approach and are classified within Level 3 of the valuation hierarchy.
Merchandise Inventories and Cost of Sales
Merchandise Inventories are stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method. For determining net realizable value, we estimate the future demand and related sale price of merchandise contained in inventory as of the balance sheet date. The stated value of Merchandise Inventories contained on our Consolidated Balance Sheets also includes freight, certain capitalized overhead costs and reserves. Factors considered in determining if our inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, historical loss rates, the length of time merchandise has been held in inventory, quantities of various styles held in inventory, seasonality of merchandise, expected consideration to be received from our vendors and current and expected future sales trends. We also review aging trends, which include the historical rate at which merchandise has sold below cost and the value and nature of merchandise currently held in inventory and priced below original cost. We reduce the value of our inventory to its estimated net realizable value where cost exceeds the estimated future selling price. Material changes in the factors previously noted could have a significant impact on the actual net realizable value of our inventory and our reported operating results.
Cost of Sales includes the cost of merchandise sold, buying, distribution, and occupancy costs, inbound freight expense, provision for inventory obsolescence, inventory shrink and credits and allowances from merchandise vendors. Cost of Sales related to our e-commerce orders includes shipping expense to deliver merchandise to our customers.
Leases
We account for our leases in accordance with Accounting Standards Codification Topic No. 842 - Leases. We evaluate whether a contract is an operating or finance lease at its inception or at its acquisition. Substantially all of our leases were operating leases as of January 31, 2026; however, as a result of the acquisition of Rogan's, we also acquired certain assets subject to finance leases. The finance lease assets and related current liabilities and noncurrent liabilities were recorded in Other Noncurrent Assets, Accrued and Other Liabilities and Other long-term liabilities, respectively. Leases with terms of twelve months or less were not significant and we have elected to expense them as incurred.
On the lease commencement date, we recognize a right-of-use (“ROU”) asset for the right to use a leased asset and a liability based on the present value of remaining lease payments over the lease term. As the rate implicit in our leases is not readily determinable, we utilize an incremental borrowing rate for the initial measurement and any subsequent remeasurements of ROU assets and liabilities, which is determined through the development of a synthetic credit rating.
Operating lease liabilities are increased by interest and reduced by payments each period, and ROU assets are amortized over the lease term. Interest on operating lease liabilities and the amortization of ROU assets results in straight-line rent expense over the lease term. We record variable lease expense associated with contingent rent, reduced rent due to co-tenancy violations, and other variable non-lease components when incurred.
In addition to fixed minimum rental payments set forth in our leases, the measurement of ROU assets and liabilities can also include prepaid rent, landlord incentives (such as construction and tenant improvement allowances), fixed payments related to lease components (such as rent escalation payments scheduled at the lease commencement date), fixed payments related to non-lease components (such as common area maintenance (“CAM”), real estate taxes and insurance) and initial direct costs incurred in conjunction with securing a lease.
The measurement of ROU assets and liabilities excludes amounts related to variable payments related to lease components (such as contingent rent payments based on performance), variable payments related to non-lease components (such as CAM, real estate taxes and insurance) and leases with an initial term of 12 months or less.
For new leases, renewals or amendments, or when we make material investments in leased properties, we make certain estimates and assumptions regarding property values, market rents, property lives, discount rates and probable terms. These estimates and assumptions can impact: (1) lease classification and the related accounting treatment; (2) rent holidays, escalations or deferred lease incentives, which are taken into consideration when calculating straight-line
expense; (3) the term over which leasehold improvements for each store are amortized; and (4) the values and lives of adjustments to initial ROU assets. The amount of amortized rent expense would vary if different estimates and assumptions were used.
See Note 11 – “Leases” for additional discussion of our lease policies as well as additional disclosures related to our leases.
Revenue Recognition
Substantially all of our revenue is for a single performance obligation and is recognized when control passes to customers. We consider control to have transferred when we have a present right to payment, the customer has title to the product, physical possession of the product has been transferred to the customer and the risks and rewards of the product that we retain are minimal. The redemption of loyalty points under our Shoe Perks loyalty rewards program and redemptions of gift cards are accounted for as separate performance obligations.
See Note 5 – “Revenue” for additional discussion of our revenue recognition policies as well as additional disclosures on revenue from contracts with customers.
Property and Equipment- Net
Property and Equipment is stated at cost and is depreciated or amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable lease terms. Lives used in computing depreciation and amortization range from two to twenty-five years. Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures that materially increase values, improve capacities or extend useful lives are capitalized. Upon sale or retirement, the costs and related accumulated depreciation or amortization are eliminated from the respective accounts and any resulting gain or loss is included in operations.
Cloud Computing Arrangements that are Service Contracts
We account for the costs to implement hosted cloud computing arrangements that are considered to be service contracts in current and noncurrent other assets. We capitalize these costs based on the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We amortize the costs over the anticipated service contract period for the hosted arrangement, which is recorded in Selling, General and Administrative Expenses (“SG&A”) .
Long-Lived Asset Impairment Testing
We periodically evaluate our long-lived assets for impairment if events or circumstances indicate that the carrying value may not be recoverable. The carrying value of long-lived assets is considered impaired when the carrying value of the assets exceeds the expected future cash flows to be derived from their use. Assets are grouped, and the evaluation is performed, at the lowest level for which there are identifiable cash flows, which is generally at a store level. Store level asset groupings typically include property and equipment and operating lease ROU assets. If the estimated, undiscounted future cash flows for a store are determined to be less than the carrying value of the store’s assets, an impairment loss is recorded for the difference between estimated fair value and carrying value. Assets subject to impairment are adjusted to estimated fair value and, if applicable, an impairment loss is recorded in SG&A. If the operating lease ROU asset is impaired, we would amortize the remaining ROU asset on a straight-line basis over the remaining lease term.
We estimate the fair value of our long-lived assets using store specific cash flow assumptions discounted by a rate commensurate with the risk involved with such assets while incorporating marketplace assumptions. Our estimates are derived from an income-based approach considering the cash flows expected over the remaining lease term for each location. These projections are primarily based on management’s estimates of store-level sales, exercise of future lease renewal options and the store’s contribution to cash flows and, by their nature, include judgments about how current initiatives will impact future performance. We estimate the fair value of operating lease ROU assets using the market value of rents applicable to the leased asset, discounted using the remaining lease term.
External factors, such as the local environment in which the store is located, including store traffic and competition, are evaluated in terms of their effect on sales trends. Changes in sales and operating income assumptions or unfavorable changes in external factors can significantly impact the estimated future cash flows. An increase or decrease in the projected cash flow can significantly impact the fair value of these assets, which may have an effect on the impairment recorded. If actual operating results or market conditions differ from those anticipated, the carrying value of certain of our assets may prove unrecoverable and we may incur additional impairment charges in the future.
Goodwill and Intangible Asset Impairment Testing
Goodwill recorded on our Consolidated Balance Sheets resulted from our acquisitions of substantially all of the assets and liabilities of Shoe Station, Inc. (“Shoe Station”) and all of the common stock of Rogan's and is based on a fair value allocation of the purchase price at the time of the respective acquisitions. Goodwill is charged to expense only when it is impaired. This test is performed at least annually and is performed at the beginning of our fiscal fourth quarter. No goodwill impairments were recognized in Fiscal 2025, Fiscal 2024 or Fiscal 2023.
We also annually test non-amortizing Intangible Assets for impairment. Trade names acquired as part of the Shoe Station and Rogan's acquisitions are our primary non-amortizing Intangible Assets. No impairments of non-amortizing Intangible Assets were recognized in Fiscal 2025, Fiscal 2024 or Fiscal 2023.
Insurance Reserves
We self-insure a significant portion of our workers’ compensation, general liability and employee health care costs and also maintain insurance in each area of risk to protect us from individual and aggregate losses over specified dollar values. Self-insurance reserves include estimates of claims filed, carried at their expected ultimate settlement value, and claims incurred but not yet reported. These estimates take into consideration a number of factors, including historical claims experience, severity factors, statistical trends and, in certain instances, valuation assistance provided by independent third parties. We record self-insurance expense as a component of Accrued and Other Liabilities in our Consolidated Balance Sheets and in SG&A in our Consolidated Statements of Income. While we believe that the recorded amounts are adequate, there can be no assurance that changes to management’s estimates will not occur due to limitations inherent in the estimating process. If actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material.
Consideration Received From a Vendor
Consideration is primarily received from merchandise vendors and includes co-operative advertising/promotion, margin assistance, damage allowances and rebates earned for a specific level of purchases over a defined period. Consideration principally takes the form of credits that we can apply against trade amounts owed.
Consideration is recorded as a reduction of the price paid for the vendor’s products and recorded as a reduction of our Cost of Sales unless the consideration represents a reimbursement of a specific, incremental, identifiable cost; in such a scenario, it is recorded as an offset to the same financial statement line item.
Consideration received after the related merchandise has been sold is recorded as an offset to Cost of Sales in the period negotiations are finalized. For consideration received on merchandise still in inventory, the allowance is recorded as a reduction to the cost of on-hand inventory and recorded as a reduction of our Cost of Sales at the time of sale. Should the consideration received be related to something other than the vendor’s product and such consideration received exceeds the incremental costs incurred then the excess consideration is recorded as a reduction to the cost of on-hand inventory and allocated to Cost of Sales in future periods as the inventory is estimated to be sold.
Advertising Costs
Digital media, print, television, radio, outdoor media and internal production costs are expensed when incurred. External production costs are expensed in the period the advertisement first takes place. Advertising expenses included in SG&A were $ 58.7 million, $ 50.5 million and $ 56.3 million in fiscal years 2025, 2024 and 2023 , respectively.
Store Opening and Start-up Costs
Non-capital expenditures, such as payroll, supplies and rent incurred prior to the opening of a new store, are charged to expense in the period they are incurred. Advertising related to new stores is expensed pursuant to the aforementioned advertising policy.
Stock-Based Compensation
We recognize compensation expense for stock-based awards using a fair value based method. Stock-based awards may include stock units, restricted stock, stock appreciation rights and other stock-based awards under our stock-based compensation plans. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our employee stock purchase plan. This discount represents the difference between the market price and the employee purchase price. Stock-based compensation expense is included in SG&A.
We account for forfeitures as they occur in calculating stock-based compensation expense for the period. For performance-based stock awards, we estimate the probability of vesting based on the likelihood that the awards will meet their performance goals.
Income Taxes
We compute income taxes using the asset and liability method, under which deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. Deferred tax assets are reduced, if necessary, by a valuation allowance to the extent future realization of those tax benefits are uncertain. We report a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize interest expense and penalties, if any, related to uncertain tax positions in Income Tax Expense.
Net Income Per Share
The following table sets forth the computation of Basic and Diluted Net Income per Share as shown on the face of the accompanying Consolidated Statements of Income:
Fiscal Year Ended
January 31, 2026
February 1, 2025
February 3, 2024
(In thousands, except per share data)
Basic Net Income per Share:
Net
Income
Shares
Per
Share
Amount
Net
Income
Shares
Per
Share
Amount
Net
Income
Shares
Per
Share
Amount
Net income
Conversion of share-based
compensation arrangements
Net income available for basic
common shares and basic
net income per share
Diluted Net Income per Share:
Net income
Conversion of share-based
compensation arrangements
Net income available for diluted
common shares and diluted
net income per share
The computation of Basic Net Income per Share is based on the weighted average number of common shares outstanding during the period. The computation of Diluted Net Income per Share is based on the weighted average number of shares outstanding plus the dilutive incremental shares that would be outstanding assuming the vesting of stock-based compensation arrangements involving restricted stock, restricted stock units and performance stock units. No unvested stock-based awards were excluded from the computation of Diluted Net Income per Share for Fiscal 2025, Fiscal 2024 or Fiscal 2023.
Litigation Matters
The accounting standard related to loss contingencies provides guidance regarding our disclosure and recognition of loss contingencies, including pending claims, lawsuits, disputes with third parties, investigations and other actions that are incidental to the operation of our business. The guidance utilizes the following defined terms to describe the likelihood of a future loss: (1) probable – the future event or events are likely to occur, (2) remote – the chance of the future event or events is slight and (3) reasonably possible – the chance of the future event or events occurring is more than remote but less than likely. The guidance also contains certain requirements with respect to how we accrue for and disclose information concerning our loss contingencies. We accrue for a loss contingency when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, we accrue for the amount at the low end of the range. We adjust our accruals from time to time as we receive additional information, but the loss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if there is at least a reasonable possibility that a loss has been incurred and such loss may be material. No accrual or disclosure is required for losses that are remote.
New Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU became effective for fiscal years beginning after December 15, 2024. We adopted this ASU as required and the additional disclosures required can be found in Note 12 – “Income Taxes.”
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments in the ASU should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and related disclosures.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the "OBBB"). The OBBB made key elements of the Tax Cuts and Jobs Act permanent, including 100 % bonus depreciation, domestic research cost expensing and the business interest expense limitation. Accounting Standards Codification Topic No. 740, "Income Taxes", requires that we recognize the effects of changes in tax rates and laws in the period in which the legislation is enacted. Consequently, our Fiscal 2025 results reflect an increase in deferred tax expense, primarily due to the impact of the 100 % bonus depreciation and domestic research cost expensing provided for in the OBBB, partially offset by reductions in our current tax expense. Enactment of the OBBB did not have a material impact on our financial statements, including our Fiscal 2025 effective tax rate.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). The guidance provides targeted improvements to the accounting for internal-use software. The guidance is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The amendments in the ASU can be applied on a prospective transition approach, a modified transition approach that is based on the status of the project and whether software costs were capitalized before the date of adoption, or a retrospective transition approach. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The guidance amends certain requirements related to interim reporting and associated disclosures. The amendments are intended to enhance transparency and consistency of information provided in interim financial statements. We are currently evaluating the provisions of this guidance and the timing of adoption. Based on our preliminary assessment, we do not expect the adoption of this guidance, which is required for periods beginning after December 15, 2027, to have a material impact on our consolidated financial statements and related disclosures.
Note 3 – Acquisition of Rogan Shoes
On February 13, 2 024, we acquired all of the stock of Rogan’s, a privately-held 53-year-old work and family footwear company incorporated in Wisconsin, for a purchase price of $ 44.8 million, net of $ 2.2 million of cash acquired, which was paid with cash on hand . This included $ 378,000 of purchase accounting adjustments which were paid in fourth quarter 2024. Additional consideration of up to $ 5.0 million may be paid by the Company subject to the achievement of three-year growth targets. At the time of the acquisition, Rogan’s operated 28 store locations in Wisconsin, Minnesota and Illinois. The Rogan’s acquisition immediately positioned us as the market leader in Wisconsin, and it established a store base in Minnesota, creating additional expansion opportunities.
Rogan’s results were included in our consolidated financial statements since the acquisition date. Net Sales from our Rogan’s operations were $ 75.6 million in Fiscal 2025 and $ 80.3 million in Fiscal 2024 . Acquisition-related costs of $ 570,000 and $ 806,000 were expensed as incurred and were included in SG&A in Fiscal 2024 and Fiscal 2023, respectively. No acquisition-related costs were included in SG&A in Fiscal 2025.
The following table summarizes the purchase price and the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed. We measured these fair values using Level 3 inputs. The excess purchase price over the fair value of net assets acquired was allocated to Goodwill.
(In thousands)
Purchase Price:
Cash consideration, net of cash acquired
Fair value of contingent consideration
Total purchase price
Fair value of identifiable assets and liabilities:
Accounts receivable
Merchandise inventories
Other assets
Operating lease right-of-use assets
Identifiable intangible assets:
Trade name
Customer relationships
Goodwill
Total assets
Accounts payable
Operating lease liabilities
Deferred income taxes
Accrued and other liabilities
Total liabilities
Total fair value allocation of purchase price
Our fair value estimate of the Merchandise Inventories for Rogan’s was determined using the Comparative Sales and Replacement Cost methods. Our fair value estimate related to the identified intangible asset of Rogan’s trade name was determined using the Relief from Royalty method, and the significant assumptions used for the valuation include the royalty rate, estimated projected revenues, long-term growth rate and the discount rate. Our fair value estimates related to Rogan’s customer relationships were determined using the Multi-Period Excess Earnings method, and the
significant assumptions used for the valuation include projected cash flows, the discount rate and customer attrition rate.
Our fair value estimate of the contingent consideration for the Rogan’s acquisition was determined using a Monte Carlo simulation and other methods that account for the probabilities of various outcomes and was recorded in Other long-term liabilities. Significant assumptions used for the valuation include the discount rate, projected cash flows and calculated volatility. This contingent consideration is remeasured on a recurring basis at fair value, with any adjustments to the payment due to Rogan’s former owners reflected within SG&A. The fair value of the contingent consideration liability was $ 451,000 and $ 395,000 as of January 31, 2026 and February 1, 2025, respectively. In Fiscal 2025 and Fiscal 2024, adjustments to the contingent consideration included in SG&A were benefits of $ 25,000 and $ 3.2 million, respectively.
Identifiable intangible assets include Rogan’s trade name and customer relationships. We assigned an indefinite life to Rogan’s trade name; therefore, Goodwill and Rogan’s trade name will be charged to expense only if impaired. Impairment reviews have been, and will be, conducted at least annually and involve a comparison of fair value to the carrying amount. If fair value is less than the carrying amount, an impairment loss would be recognized in SG&A. Customer relationships are subject to amortization and will be amortized over a period of 20 years. The amortization of the customer relationships was $ 45,000 in both Fiscal 2025 and Fiscal 2024. Goodwill and the acquisition-related Intangible Assets are not deductible for tax purposes.
Note 4 – Fair Value of Financial Instruments
The following table presents financial instruments that are measured at fair value on a recurring basis at January 31, 2026 and February 1, 2025:
Fair Value Measurements
(In thousands)
Level 1
Level 2
Level 3
Total
As of January 31, 2026:
Cash equivalents – money market mutual funds
Marketable securities - mutual funds that fund
deferred compensation
Total
As of February 1, 2025:
Cash equivalents – money market mutual funds
Marketable securities - mutual funds that fund
deferred compensation
Total
See Note 13 – “Employee Benefit Plans” for additional discussion and additional disclosures related to our Marketable Securities that fund deferred compensation. The fair values of Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, Accrued Expenses and Other Current Liabilities approximate their carrying values because of their short-term nature.
The fair value of the Shoe Station and Rogan’s trade names were estimated when tested for impairment using a relief-from-royalty method. The estimates and assumptions used in the determination of the fair value of each brand included their respective projected revenue growth, long-term growth rate, the royalty rate and discount rate. No impairments were recognized.
Note 5 – Revenue
Disaggregation of Net Sales by Product Category
Net Sales and percentage of Net Sales, disaggregated by product category, for fiscal years 2025, 2024 and 2023 were as follows:
(In thousands)
January 31,
February 1,
February 3,
Non-Athletics:
Women's
Men's
Children's
Total
Athletics:
Women's
Men's
Children's
Total
Accessories
Other
Total
Accounting Policy and Performance Obligations
We operate as an omnichannel, family footwear retailer and provide the convenience of shopping at our physical stores or shopping online through our e-commerce platform. As part of our omnichannel strategy, we offer Shoes 2U, a program that enables us to ship product to a customer’s home or selected store if the product is not in stock at a particular store. We also offer “buy online, pick up in store” services for our customers. “Buy online, pick up in store” provides the convenience of local pickup for our customers.
For our physical stores, we satisfy our performance obligation and control is transferred at the point of sale when the customer takes possession of the products. This also includes the “buy online, pick up in store” scenario described above and includes sales made via our Shoes 2U program when customers choose to pick up their goods at a physical store. For sales made through our e-commerce sales channel in which the customer chooses home delivery, we transfer control and recognize revenue when the product is shipped. This also includes sales made via our Shoes 2U program when the customer chooses home delivery.
We offer our customers sales incentives including coupons, discounts, and free merchandise. Sales are recorded net of such incentives and returns and allowances. If an incentive involves free merchandise, that merchandise is recorded as a zero sale and the cost is included in Cost of Sales. Gift card revenue is recognized at the time of redemption. When a customer makes a purchase as part of our rewards program, we allocate the transaction price between the goods purchased and the loyalty reward points and recognize the loyalty revenue based on estimated customer redemptions.
Transaction Price and Payment Terms
The transaction price is the amount of consideration we expect to receive from our customers and is reduced by any stated promotional discounts at the time of purchase. The transaction price may be variable due to terms that permit customers to exchange or return products for a refund. The implicit contract with the customer reflected in the transaction receipt states the final terms of the sale, including the description, quantity, and price of each product purchased. The customer agrees to a stated price in the contract that does not vary over the term of the contract and may include revenue to offset shipping costs. Taxes imposed by governmental authorities such as sales taxes are excluded from Net Sales.
We accept various forms of payment from customers at the point of sale typical for an omnichannel retailer. Payments made for products are generally collected when control passes to the customer, either at the point of sale or at the time the customer order is shipped. For Shoes 2U transactions, customers may order the product at the point of sale. For these transactions, customers pay in advance and unearned revenue is recorded as a contract liability. We recognize the related revenue when control has been transferred to the customer (i.e., when the product is picked up by the customer or shipped to the customer). Unearned revenue related to Shoes 2U was not material to our consolidated financial statements at January 31, 2026 or February 1, 2025.
Returns and Refunds
We have established an allowance based upon historical experience in order to estimate return and refund transactions. This allowance is recorded as a reduction in sales with a corresponding refund liability recorded in Accrued and Other Liabilities. The estimated cost of Merchandise Inventory is recorded as a reduction to Cost of Sales and an increase in Merchandise Inventories. At January 31, 2026, approximately $ 1.1 million of refund liabilities and $ 545,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively. At February 1, 2025 , approximately $ 1.1 million of refund liabilities and $ 726,000 of right of return assets associated with estimated product returns were recorded in Accrued and Other Liabilities and Merchandise Inventories, respectively.
Contract Liabilities
The issuance of a gift card is recorded as an increase to contract liabilities and a decrease to contract liabilities when a customer redeems a gift card. Estimated breakage is determined based on historical breakage percentages and recognized as revenue based on expected gift card usage. We do not record breakage revenue when escheat liability to relevant jurisdictions exists. At January 31, 2026 and February 1, 2025, $ 2.0 million and $ 2.3 million o f contract liabilities associated with unredeemed gift cards were recorded in Accrued and Other Liabilities, respectively. We expect the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions within two year s. Breakage revenue associated with our gift cards recognized in Net Sales was $ 457,000 in Fiscal 2025. Breakage revenue associated with our gift cards recognized in Net Sales was $ 845,000 in Fiscal 2024, primarily related to Rogan’s as well as increasing breakage rates. Breakage revenue associated with our gift cards recognized in Net Sales was not material in Fiscal 2023.
Our Shoe Perks rewards program allows customers to accrue points and provides customers with the opportunity to earn rewards. Points under Shoe Perks are earned primarily by making purchases through any of our omnichannel points of sale. Once a certain threshold of accumulated points is reached, the customer earns a reward certificate, which is redeemable through any of our sales channels.
When a Shoe Perks customer makes a purchase, we allocate the transaction price between the goods purchased and the loyalty reward points earned based on the relative standalone selling price. The portion allocated to the points program is recorded as a contract liability for rewards that are expected to be redeemed. We then recognize revenue based on an estimate of when customers redeem rewards, which incorporates an estimate of points expected to expire using historical rates. Loyalty awards recognized in Net Sales were $ 4.1 million, $ 3.5 million and $ 6.1 million during fiscal years 2025, 2024 and 2023, respectively. At January 31, 2026 and February 1, 2025, approximately $ 627,000 and $ 564,000 of contract liabilities associated with loyalty rewards were recorded in Accrued and Other Liabilities, respectively. We expect the revenu e associated with these liabilities to be recognized in proportion to the pattern of customer redemptions in less than one year.
Note 6 – Segment Reporting
Shoe Carnival, Inc. has a single operating and reportable segment that sells footwear and related merchandise for the family across our retail banners and sales channels. With respect to our omnichannel strategy, our e-commerce sales channel is integrated with our physical store locations across 35 states and Puerto Rico and is fundamentally inseparable in how we serve our target customers.
Our chief operating decision maker (“CODM”) during Fiscal 2025 was our president and chief executive officer . The CODM assessed performance and decided how to allocate resources based on Net Income that also is reported on the
income statement as our consolidated Net Income. The CODM used Net Income to evaluate performance in deciding whether to reinvest profits, facilitate acquisitions or return funds to shareholders through dividends or share repurchases. Net Income was used to monitor budget versus actual results and in competitive analysis by benchmarking to our peers and competitors. The benchmarking analysis and the monitoring of budgeted versus actual results were used in assessing our performance and in establishing management’s compensation.
We have concluded that, on the basis of the principles in FASB ASU 2023-07, Segment Reporting (Topic 280), the expenses below require disclosure under the significant expense principle . The CODM did not review assets in evaluating results. Therefore, such information is not provided. Operating financial results of our segment for fiscal years 2025, 2024 and 2023 are as follows:
(In thousands)
January 31,
February 1,
February 3,
Net sales
Less:
Merchandise & delivery costs (1)
Store occupancy costs
Store expenses (2)
E-commerce expenses (3)
Advertising
Store depreciation and other selling expenses (4)
General and administrative expenses (5)
Other segment items (6)
Interest income
Interest expense
Income tax expense
Net income
Merchandise & delivery costs include the cost of merchandise and other buying and distribution costs.
Store expenses include selling expenses generally controlled operationally at the store level, such as store level payroll.
E-commerce expenses include primarily website maintenance costs and other selling expenses.
See Note 7 – “Property and Equipment” for more information. Other selling expenses include store-related health care, other insurance, licensing/tax costs and Property and Equipment write-offs.
General and administrative expenses include departmental and corporate expenses, including incentive and share-based compensation and merger and integration expenses.
Other segment items represent non-operating income resulting from pandemic-related tax credits associated with our acquisition of Rogan's in February 2024.
Note 7 – Property and Equipment
The following is a summary of Property and Equipment:
(In thousands)
January 31,
February 1,
Land
Buildings
Furniture, fixtures and equipment
Leasehold improvements
Total
Less accumulated depreciation and amortization
Property and equipment – net
Total depreciation expense associated with Property and Equipment was $ 31.4 million in Fiscal 2025 , $ 28.3 million in Fiscal 2024 and $ 25.8 million in Fiscal 2023. As of January 31, 2026 and February 1, 2025, there was $ 12.1 million and $ 11.4 million, respectively, of construction work in process included in Property and Equipment, primarily related to store rebanners/remodels and new store construction activity.
No impairment charges on long-lived assets held and used were recorded in Fiscal 2025, Fiscal 2024 or Fiscal 2023 . Impairment charges would be included in SG&A in our Consolidated Statements of Income.
Note 8 – Cloud Computing Arrangements that are Service Contracts
We have engaged third-party providers to host software for us, including our customer relationship management (“CRM”) platform, merchandise financial planning platform and our transportation, warehouse and order management systems. These platforms are cloud computing arrangements that are software-as-a-service (“SaaS”) contracts. Net capitalized costs related to cloud computing arrangements as of January 31, 2026 and February 1, 2025 were $ 12.5 million and $ 14.4 million, respectively. Total amortization expense related to these arrangements was $ 2.8 million during Fiscal 2025, $ 2.7 million during Fiscal 2024 and $ 3.0 million during Fiscal 2023. As of January 31, 2026 , $ 3.0 million of net capitalized costs related to cloud computing arrangements were classified in Other Current Assets and $ 9.5 million were classified as Other Noncurrent Assets in our Consolidated Balance Sheets. As of February 1, 2025 , $ 3.2 million of net capitalized costs related to cloud computin g arrangements were classified in Other Current Assets and $ 11.2 million were classified as Other Noncurrent Assets in our Consolidated Balance Sheets.
Note 9 – Other Consolidated Balance Sheets and Consolidated Statements of Income Information
Accrued and Other Liabilities consisted of the following:
(In thousands)
January 31,
February 1,
Employee compensation and benefits
Current portion of non-qualified deferred compensation
Sales and use tax
Gift cards
Self-insurance reserves
Other
Total accrued and other liabilities
Interest and Other Income consisted of the following:
(In thousands)
January 31,
February 1,
February 3,
Interest income
Other non-operating income
Interest and other income
Note 10 – Debt
On March 23, 2022, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), which replaced our then-existing credit agreement. This $ 100 million amended and restated credit agreement is collateralized by our inventory, expires on March 23, 2027 and contains a swingline sublimit of $ 15 million. Material covenants associated with the 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. The Credit Agreement also provides 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 Credit Agreement also limits our ability to incur additional secured or unsecured debt to $ 20 million. The 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.
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 Credit Agreement.
No borrowings were outstanding under the Credit Agreement as of January 31, 2026 or February 1, 2025 , and we did no t borrow under the Credit Agreement during Fiscal 2025 or Fiscal 2024. As of January 31, 2026, there were $ 1.0 million in letters of credit outstanding and $ 99.0 million available t o us for borrowing under the Credit Agreement.
Note 11 – Leases
We lease all of our physical stores, our Evansville distribution center, which has a current lease term expiring in 2034 , and other warehousing and office space. We also enter into leases of equipment and other assets. Substantially all of our leases are operating leases; however, as a result of the acquisition of Rogan’s, we also acquired certain assets subject to finance leases. The finance lease assets and related current liabilities and noncurrent liabilities were recorded in Other Noncurrent Assets, Accrued and Other Liabilities and Other long-term liabilities, respectively. Leases with terms of twelve months or less are immaterial and are expensed as incurred, and we did not have any leases with related parties or any sublease arrangements with any related party or third party as of January 31, 2026. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Our real estate leases typically include options to extend the lease or to terminate the lease at our sole discretion. Options to extend real estate leases typically include one or more options to renew, with renewal terms that typically extend the lease term for five years or more. Many of our leases also contain “co-tenancy” provisions, including the required presence and continued operation of certain anchor tenants in the adjoining retail space. If a co-tenancy violation occurs, we have the right to a reduction of rent for a defined period after which we have the option to terminate the lease if the violation is not cured. In addition to co-tenancy provisions, certain leases contain “go-dark” provisions that allow us to cease operations while continuing to pay rent through the end of the lease term. When determining the lease term, we include options that are reasonably certain to be exercised.
Our leases typically provide for fixed minimum rental payments, and certain leases provide for contingent rental payments based upon various specified percentages of sales above minimum levels. In addition to rental payments, we are required to pay certain non-lease components, such as real estate taxes, insurance and common area maintenance, on most of our real estate leases. Such non-lease components are typically variable in nature. Certain real estate leases also contain escalation clauses for increases in minimum rentals, operating costs and taxes.
Lease costs , including other related occupancy costs, reported in our Consolidated Statements of Income were as follows:
(In thousands)
Operating lease cost
Variable lease cost
Occupancy costs
Percentage rent and other variable lease costs
Finance lease cost
Amortization of leased assets
Interest on lease liabilities
Total
Other information related to leases, including supplemental cash flow information, consists of:
(In thousands)
Cash paid for amounts included in the measurement of
operating lease liabilities
ROU assets obtained in exchange for operating lease
liabilities (1)
January 31, 2026
February 1, 2025
February 3, 2024
Weighted-average remaining lease term for operating leases
(in years)
Weighted-average discount rate for operating leases
(1) Includes ROU assets added as part of the Rogan's acquisition described in Note 3 – “Acquisition of Rogan Shoes”
The following table reconciles the undiscounted cash flows for each of the next five years and the total of the remaining years to our operating lease liabilities as of January 31, 2026:
(In thousands)
Operating Leases
Thereafter to 2041
Total undiscounted lease payments
Less: Imputed interest
Total operating lease liabilities
Less: Current portion of operating lease liabilities
Long-term portion of operating lease liabilities
Note 12 – Income Taxes
The provision for income taxes consisted of:
(In thousands)
Current:
Federal
State
Puerto Rico
Total current
Deferred:
Federal
State
Total deferred
Valuation allowance
Total provision
Reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows:
Fiscal years
U.S. Federal statutory income tax rate
State and local, net of federal benefit (1)
Effect of cross-border tax laws (2)
Tax credits
Nontaxable or nondeductible items
Other adjustments
Changes in valuation allowance (2)
Effective income tax rate
(1) State taxes comprised the majority (greater than 50%) of the tax effect in the category as follows:
Fiscal 2025: Illinois, Wisconsin, Texas, Indiana, Florida, Alabama and Tennessee
Fiscal 2024: Illinois, Wisconsin, Indiana, Florida and Alabama
Fiscal 2023: Illinois, Indiana, Florida, Alabama, Texas and Georgia
(2) Our Puerto Rico operations, net of related tax credits, are presented in the rate reconciliation as “Effect of cross-border tax laws.” Changes in our valuation allowance represents tax credits generated by our Puerto Rico operations that are not expected to be utilized.
Deferred Income Taxes are the result of temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The sources of these differences and the tax effect of each are as follows:
(In thousands)
January 31,
February 1,
Deferred tax assets:
Lease obligations
Accrued compensation
Inventory reserve
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets – net of valuation
allowance
Deferred tax liabilities:
Lease ROU assets
Depreciation
Other
Total deferred tax liabilities
Net deferred tax liability
We have tax credit carryforwards associated with our Puerto Rico operations totaling $ 3.9 million at January 31, 2026 and $ 3.6 million at February 1, 2025. These credits expire at various times over the next nine y ears . We have taken a full valuation allowance against these credits given they are not expected to be utilized due to the current differential between U.S. and Puerto Rico tax rates.
As of January 31, 2026 and February 1, 2025 , there were no unrecognized tax liabilities or related accrued penalties or interest.
Income taxes paid, net of refunds received, disaggregated as follows:
(In thousands)
Federal
State
Puerto Rico
Total taxes paid, net of refunds received
During the years ended January 31, 2026, February 1, 2025, and February 3, 2024, no jurisdiction, other than Puerto Rico in Fiscal 2025 and Fiscal 2023, exceeded 5 % of the total cash income taxes paid.
Note 13 – Employee Benefit Plans
Retirement Savings Plans
Our Board of Directors-approved Shoe Carnival Retirement Savings Plan (the “Domestic Savings Plan”) is open to all employees working in the continental United States who have been employed for at least one year , are at least 21 years of age and who work at least 1,000 hours in a defined year. The primary savings mechanism under the Domestic Savings Plan is a 401(k) plan under which an employee may contribute up to 20 % of annual earnings with a matching Company contribution up to the first 4 % at a rate of 50 %. Our contributions to the participants’ accounts become fully vested when participants reach their third anniversary of employment with us.
Our Board of Directors-approved Shoe Carnival Puerto Rico Savings Plan (the “Puerto Rico Savings Plan”) is open to all employees working in Puerto Rico who have been employed for at least one year , are at least 21 years of age and who work at least 1,000 hours in a defined year. This plan is similar to our Domestic Savings Plan, whereby an
employee may contribute up to 20 % of his or her annual earnings, with a matching Company contribution up to the first 4 % at a rate of 50 %.
Contributions charged to expense associated with these plans were $ 1.1 million, $ 1.1 million and $ 1.0 million in fiscal years 2025, 2024 and 2023, respectively.
Deferred Compensation Plan
We have a non-qualified deferred compensation plan for certain key employees who, due to Internal Revenue Service guidelines, cannot take full advantage of the employer-sponsored 401(k) plan. Participants in the plan may elect on an annual basis to defer, on a pre-tax basis, portions of their current compensation until retirement, or earlier if so elected. We voluntarily match a portion of the employees’ contributions, which is subject to vesting requirements. The compensation deferred under this plan is credited with earnings or losses measured by the rate of return on investments elected by plan participants. The liabilities of our deferred compensation plan are presented in Deferred Compensation, a long-term liability, or in Accrued and Other Liabilities if scheduled payments are due within the next 12 months.
We invest in publicly traded mutual funds with readily determinable fair values. These Marketable Securities are designed to mitigate volatility in our Consolidated Statements of Income associated with our non-qualified deferred compensation plan. As of January 31, 2026, these Marketable Securities were principally invested in equity-based mutual funds, consistent with the allocation in our deferred compensation plan. To the extent there is a variation in invested funds compared to the total non-qualified deferred compensation plan liability, such fund variance is managed through a stable value mutual fund. We classify these Marketable Securities as current assets because we have the ability to convert the securities into cash at our discretion and these Marketable Securities are not held in a rabbi trust. Changes in these Marketable Securities and deferred compensation plan liabilities are charged to SG&A.
The following tables present the balances and activity of the Company's deferred compensation plan liabilities and related Marketable Securities:
(In thousands)
January 31,
February 1,
Deferred compensation plan current liabilities
Deferred compensation plan long-term liabilities
Total deferred compensation plan liabilities
Marketable securities - mutual funds that fund deferred compensation
(In thousands)
Deferred compensation liabilities
Employer contributions, net
Investment earnings
Marketable Securities
Mark-to-market gains (1)
Net deferred compensation expense
(1) Included in the mark-to-market gains in Fiscal 2025, Fiscal 2024 and Fiscal 2023, we recognized unrealized gains of $ 0.4 million, $ 1.0 million and $ 1.4 million related to equity securities still held at January 31, 2026, February 1, 2025 and February 3, 2024, respectively.
Note 14 – Stock-Based Compensation
On June 20, 2023, our shareholders approved an amendment and restatement of the Shoe Carnival, Inc. 2017 Equity Incentive Plan (as amended and restated, the “2017 Equity Plan”). Pursuant to the amendment and restatement, the number of shares of our common stock available for issuance under the 2017 Equity Plan was increased by an additional 1.8 million shares, the term of the 2017 Equity Plan was extended an additional ten years from the date of shareholder approval, and certain other design changes were made to the plan.
Stock-based compensation includes share-settled awards issued pursuant to our 2017 Equity Plan in the form of restricted stock units, performance stock units, and restricted and other stock awards. Additionally, we recognize
stock-based compensation expense for the discount on shares sold to employees through our Employee Stock Purchase Plan and for cash-settled stock appreciation rights (“SARs”). For fiscal years 2025, 2024 and 2023, stock-based compensation expense was comprised of the following:
(In thousands)
Share-settled equity awards
Stock appreciation rights
Employee stock purchase plan
Total stock-based compensation expense
Income tax benefit at statutory rates
Additional income tax (shortfall) benefit on vesting of share-settled awards
As of January 31, 2026 , there was approximately $ 8.4 million of unrecognized compensation expense remaining related to our share-settled equity awards. The cost is expected to be recognized over a weighted average period of approximately 1.4 years.
Under the 2017 Equity Plan, we may issue stock units, restricted stock, stock appreciation rights, stock options and other stock-based awards to eligible participants. According to the terms of the 2017 Equity Plan, no further awards may be made from any previously approved equity plans. As of January 31, 2026, there were approximately 1.3 million shares of our common stock available for issuance under the 2017 Equity Plan, assuming that all unmeasured but outstanding performance stock units vest at the maximum level of performance.
Equity awards issued to employees are classified as either performance-based or service-based. Our outstanding performance-based equity awards were granted such that vesting depended on whether Diluted Net Income per Share met an established threshold, target, or maximum level of performance. Diluted Net Income per Share below the threshold level of performance results in complete forfeiture of the award. None of the performance stock units granted in Fiscal 2023 were earned. The performance stock units granted in Fiscal 2024 that were earned based on our actual performance vest in full on March 31, 2027. The performance stock units granted in Fiscal 2025 that were earned based on our actual performance vest in full on March 31, 2028. Other vesting scenarios have been used in prior years and for awards used to incentivize specific employee performance.
Our service-based restricted stock units and restricted stock awards vest under different scenarios based on the year they were granted, as determined and approved by our Board of Directors. The restricted stock units granted in Fiscal 2025 and Fiscal 2024 vest one-half after two years and the remaining half after three years. Restricted stock units granted in Fiscal 2023 vest one-third after two years and two-thirds after three years. For our non-employee Board members and Vice Chairman, all restricted stock awards are issued to vest on January 2 nd of the year following the year of the grant. Our Chairman of the Board receives an annual award in which the shares are fully vested upon grant. Awards that contain both performance and service-based conditions require that the performance target be met during the required service period. Other vesting scenarios have been used for employees in prior years and for sign-on awards granted to newly hired employees.
Under the 2017 Equity Plan, recipients of restricted stock, restricted stock units and performance stock units are entitled to receive dividend equivalents, based on dividends actually declared and paid, on such awards, and such dividend equivalents are subject to the same restrictions and risk of forfeiture as the restricted stock, restricted stock units and performance stock units.
Share-Settled Equity Awards
The following table summarizes transactions for our restricted stock units and performance stock units:
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Outstanding at February 1, 2025
Granted
Vested
Forfeited
Outstanding at January 31, 2026
The total fair value at grant date of restricted stock units and performance stock units that vested during Fiscal 2025, Fiscal 2024 and Fiscal 2023 was $ 7.5 million, $ 1.4 million and $ 4.8 million, respectively. The weighted-average grant date fair value of restricted stock units and performance stock units granted during Fiscal 2024 and Fiscal 2023 was $ 32.06 and $ 24.99 , respectively.
The following table summarizes transactions for our restricted stock and other stock awards:
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Outstanding at February 1, 2025
Granted
Vested
Outstanding at January 31, 2026
The total fair value at grant date of restricted stock and other stock awards that vested during each of Fiscal 2025, Fiscal 2024 and Fiscal 2023 was $ 0.7 million , $ 0.5 million and $ 0.5 million, respectively. The weighted-average grant date fair value of restricted stock and other stock awards granted during Fiscal 2024 and Fiscal 2023 was $ 36.84 and $ 21.90 , respectively.
Cash-Settled Stock Appreciation Rights
Cash-settled SARs were granted to certain non-executive employees. Each SAR entitles holders, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined. The SARs granted during the first quarter of Fiscal 2021 vested and became fully exercisable on March 31, 2022 and any unexercised SARs expired on March 31, 2024. The SARs issued in Fiscal 2021 had a defined maximum gain of $ 5.00 over the exercise price of $ 30.94 .
The fair value of these liability awards were remeasured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense were recognized over the vesting period, or immediately for vested awards. No additional SARs have been granted since Fiscal 2021.
Stock Purchase Plan
In 1995, our Board of Directors and shareholders approved the Shoe Carnival, Inc. Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan reserves 450,000 shares of our common stock (subject to adjustment for any subsequent stock splits, stock dividends and certain other changes in our common stock) for issuance and sale to any employee who has been employed for more than a year at the beginning of the calendar year, and who is not a 10 % owner of our common stock, at 85 % of the then fair market value up to a maximum of $ 5,000 in any calendar year. Under the Stock Purchase Plan, 11,000 , 6,000 and 9,000 shares of common stock were purchased by plan participants and proceeds to us for the sale of those shares were approximately $ 172,000 , $ 169,000 and $ 183,000 for fiscal years 2025, 2024 and 2023, respectively. At January 31, 2026 , there were approximately 84,000 shares of unissued common stock reserved for future purchase under the Stock Purchase Plan.
Note 15 – Share Repurchase Program
On December 10, 2025, our Board of Directors authorized a share repurchase program for up to $ 50 million of our outstanding common stock, effective January 1, 2026 (the “2026 Share Repurchase Program”). The purchases may be made in the open market or through privately negotiated transactions from time to time through December 31, 2026 and in accordance with applicable laws, rules and regulations. The 2026 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, the share repurchase program 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.
The 2026 Share Repurchase Program replaced a $ 50 million share repurchase program that was authorized in December 2024, became effective January 1, 2025 and expired in accordance with its terms on December 31, 2025 . No shares were repurchased during Fiscal 2025 or Fiscal 2024. Shares totaling 230,696 were repurchased during Fiscal 2023 at a cost of $ 5.4 million.
See Note 10 – “Debt” for a discussion of our Credit Agreement and its restrictions regarding share repurchases.
Note 16 – Litigation and Business Risk
Litigation Risk
From time to time, we are involved in certain legal proceedings in the ordinary course of conducting our business. While the outcome of any legal proceeding is uncertain, we do not currently expect that any such proceedings will have a material adverse effect on our consolidated balance sheets, statements of income, or cash flows.
Business Risk
Three branded suppliers, Nike, Inc. (“Nike”), Skechers U.S.A., Inc. (“Skechers”) and Crocs, Inc. (“Crocs”), collectively accounted for approximately 46 % of our Net Sales in Fiscal 2025, 48 % of our Net Sales in Fiscal 2024 and 45 % of our Net Sales in Fiscal 2023. Nike accounted for approximately 24 % of our Net Sales in Fiscal 2025, 24 % of our Net Sales in Fiscal 2024 and 20 % of our Net Sales in Fiscal 2023; Skechers accounted for approximately 13 % of our Net Sales in Fiscal 2025, 13 % of our Net Sales in Fiscal 2024 and 14 % of our Net Sales in Fiscal 2023; and Crocs accounted for approximately 9 % of our Net Sales in Fiscal 2025 and 11 % of our Net Sales in both Fiscal 2024 and Fiscal 2023. A loss of any of our key suppliers in certain product categories could have a material adverse effect on our business. As is common in the industry, we do not have any long-term contracts with suppliers.
Note 17 – Subsequent Events
Dividends
On March 3, 2026, the Board of Directors (the “Board”) approved the payment of a cash dividend to our shareholders in the first quarter of Fiscal 2026. The quarterly cash dividend of $ 0.170 p er share will be paid on April 20, 2026 to shareholders of record as of the close of business on April 6, 2026 .
The declaration and payment of any future dividends are at the discretion of the Board and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by the Board. See Note 10 – “Debt” for a discussion of our Credit Agreement and its restrictions regarding dividend payments and acquisitions.
CEO Transition
On February 24, 2026, Mark J. Worden departed from his position as President and Chief Executive Officer of the Company. In connection with his departure, Mr. Worden resigned as a member of the Board, effective immediately. Mr. Worden’s departure was not due to any disagreement with the Company on any matter relating to its operations, policies or practices.
On February 24, 2026, the Board appointed Clifton E. Sifford to serve as our Interim President and Chief Executive Officer. Mr. Sifford will continue to serve as the Vice Chairman of the Board as well. Mr. Sifford was also designated as our principal executive officer, effective as of February 24, 2026.
Pursuant to the terms of the Amended and Restated Employment and Noncompetition Agreement, dated as of November 1, 2024, between the Company and Mr. Worden (the “Employment Agreement”), in connection with his departure, we are providing Mr. Worden with the payments required to be made to him under the terms of the Employment Agreement upon a termination without cause, subject to Mr. Worden complying with the covenants set forth in the Employment Agreement. Mr. Worden also executed and delivered a release of claims against the Company pursuant to the terms of the Employment Agreement. Payments to Mr. Worden included 168,184 shares of our common stock issued to Mr. Worden for the settlement of outstanding equity awards whose vesting accelerated upon his termination and will include a cash payment of $ 4.8 million. These payments, net of accruals for incentive and stock-based compensation as of January 31, 2026, will have an estimated effect on Net Income per Diluted Share for Fiscal 2026 of approximately $ 0.20 to $ 0.22 .
Supreme Court Tariff Ruling
In February 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed by the United States executive branch under the International Emergency Economic Powers Act (“IEEPA”). The United States executive branch subsequently instituted additional tariffs under other laws. These actions have resulted in considerable uncertainty regarding the scope and duration of current and potential tariffs and the impact this uncertainty may have on us, including availability and timing of refunds of tariffs paid under IEEPA. We continue to monitor and evaluate tariff policy and assess the potential impact on our business, financial condition, and results of operations. At this time, we cannot reasonably estimate the total financial impact of these events; however, these actions, and any additional tariffs imposed, may materially affect our future results of operations and cash flows.
