Shoe Carnival Reports Fourth Quarter and Full Year 2008 Results

Shoe Carnival, Inc. (NASDAQ: SCVL) a leading retailer of value-priced footwear and accessories, today reported sales and earnings for the 13-week fourth quarter and 52-week fiscal year ended January 31, 2009.

Fourth Quarter Results

Net sales for the fourth quarter of 2008 were $156.9 million compared to net sales of $164.3 million last year. Comparable store sales decreased 8.3 percent for the 13-week period.

For the quarter, the Company reported a net loss of $3.0 million, or $0.24 per diluted share, compared to net earnings of $1.1 million, or $0.09 per diluted share, for the quarter last year. Included in the fourth quarter of 2008 were store closing costs of $0.12 per diluted share compared with $0.08 per diluted share in the fourth quarter last year.

The gross profit margin for the fourth quarter of 2008 was 24.7 percent compared to 27.5 percent for the fourth quarter of 2007. The merchandise margin decreased 2.0 percent due to a more promotional holiday sales period and our aggressive clearance of seasonal product during the quarter. This clearance activity allowed us to reduce our per-store inventory levels at the end of the quarter by almost 10 percent, compared to the prior year. Buying, distribution and occupancy costs increased 0.8 percent, as a percentage of sales, due primarily to the deleveraging effect of lower sales.

Selling, general and administrative expenses for the fourth quarter were $43.6 million, which was flat with the prior year. As a percentage of sales, selling, general and administrative expenses increased to 27.8 percent from 26.5 percent in the fourth quarter of 2007, due to the deleveraging effect of lower sales. Store closing costs in the quarter were $2.4 million, of which, $1.9 million was a non-cash impairment charge to fixed assets. Included in last year’s fourth quarter were $1.4 million in stores closing costs, including a non-cash impairment charge to fixed assets of $1.2 million.

Fiscal 2008 Results

Net sales were $647.6 million for fiscal 2008, compared to net sales of $658.7 million last year. Comparable store sales decreased 4.6 percent for the 52-week period.

Net earnings for fiscal 2008 were $5.3 million, or $0.43 per diluted share, compared to net earnings of $12.8 million, or $0.97 per diluted share, for fiscal 2007.

Commenting on the results, Mark Lemond, chief executive officer and president said, "Faced with a deteriorating economy, we continued to operate our business in a conservative fashion in the fourth quarter. Despite operating 13 more stores at the end of the quarter, we were able to keep operating expenses flat with last year. Additionally, our merchants and store managers did a commendable job of controlling inventories, which resulted in a year-over-year decline in per-store inventories of almost 10 percent.

"During the full fiscal year 2008, we were able to generate free cash flow of $13.9 million and end the year with $24.8 million in cash and equivalents, with no interest bearing debt."

Mr. Lemond continued, "We expect the retail footwear environment will continue to be challenging, at least through the first half of fiscal 2009. As a result, we have planned our advertising, sales promotions and inventory strategies accordingly. Our inventory levels at year end leave us well positioned for both spring transition and market-place purchasing opportunities. Our priority for 2009, is to manage our business to increase market share, generate free cash flow and maintain our strong financial position."

Store Growth

During fiscal 2008, 24 new stores were opened and 11 were closed to end the year at 304 stores. Two stores were opened in the fourth quarter and eight were closed. On a net basis, selling space increased 97,000 square feet during fiscal 2008 bringing total retail selling space to 3.3 million square feet.

Store openings and closings by quarter and for the year are as follows:

The stores that opened during the fourth quarter included locations in:

In fiscal 2009, we expect to open approximately 15 stores, 10 of which are expected to open in the first quarter. We expect to close approximately 10 stores during the year.

Conference Call

Today, at 2:00 p.m. Eastern time, the Company will host a conference call to discuss the fourth quarter results. The public can listen to the live webcast of the call by visiting Shoe Carnival's Investor Relations page at www.shoecarnival.com. While the question-and-answer session will be available to all listeners, questions from the audience will be limited to institutional analysts and investors. A replay of the webcast will be available on the Company's website beginning approximately two hours after the conclusion of the conference call and will be archived for one year.

Record Date and Date of Annual Shareholder Meeting

The Company also announced that June 9, 2009 has been set as the date for the Annual Meeting of Shareholders and April 9, 2009 was set as the shareholder record date.

Cautionary Statement Regarding Forward-Looking Information

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: general economic conditions in the areas of the United States in which our stores are located; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales at our stores; the potential impact of national and international security concerns on the retail environment; changes in our relationships with key suppliers; the impact of competition and pricing; changes in weather patterns, consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations; the effectiveness of our inventory management; the impact of hurricanes or other natural disasters on our stores, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; our ability to successfully execute our growth strategy, including the availability of desirable store locations at acceptable lease terms, our ability to open new stores in a timely and profitable manner and the availability of sufficient funds to implement our growth plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; changes in the political and economic environments in the People’s Republic of China, Brazil, Spain and East Asia, the primary manufacturers of footwear; and the continued favorable trade relations between the United States and China and the other countries which are the major manufacturers of footwear. See ITEM 1A. RISK FACTORS of our Annual Report on Form 10-K for the fiscal year ended February 2, 2008.

In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this press release do not purport to be predictions of future events or circumstances and may not be realized. Forward-looking statements can be identified by, among other things, the use of forward-looking terms such as "believes," "expects," "may," "will," "should," "seeks," "pro forma," "anticipates," "intends" or the negative of any of these terms, or comparable terminology, or by discussions of strategy or intentions. Given these uncertainties, we caution investors not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We disclaim any obligation to update any of these factors or to publicly announce any revisions to the forward-looking statements contained in this press release to reflect future events or developments.

Shoe Carnival is a chain of 308 footwear stores located in the Midwest, South and Southeast. Combining value pricing with an entertaining store format, Shoe Carnival is a leading retailer of name brand and private label footwear for the entire family. Headquartered in Evansville, IN, Shoe Carnival trades on The Nasdaq Stock Market LLC under the symbol SCVL. Shoe Carnival's press releases and annual report are available on the Company's website at www.shoecarnival.com.

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