Shoe Carnival, Inc. (SCVL) is a family footwear retailer that operates in the United States. By growing its e-commerce business exponentially and revamping its stores, the company has boosted its sales significantly. The stock has gained 31.5% over the past three months to close yesterday’s trading session at $61.66. In fact, it is trading just 4.3% below its 52-week high, which it hit on April 26.
Because the company next plans to modernize its most profitable brick-and-mortar stores to better serve its customers, we think it is well positioned to drive long-term growth and maintain its momentum.
Although some retail giants continue to hog investors’ attention, the relatively smaller player SCVL has not only managed to recover from last year’s COVID-19-driven market disruptions but appears to be making the most of the current environment through an acceleration of its omnichannel capabilities and its operational excellence.
Here is what we think could shape SCVL’s performance in the near term:
Strong Retail Landscape
After having survived the havoc wreaked by the pandemic last year, the retail sector has quickly adopted digital operations, omnichannel platforms and new marketing techniques to remain relevant for customers. There’s no doubt that fast-paced digitalization and virtual shopping has created new opportunities for the industry. With retail spaces investing in cyber-based sales channels and offering contactless shopping and touchless technology experiences to enrich customer experiences, the sector is expected to see exponential growth in the coming years.
SCVL has been growing its e-commerce business while investing strategically in its omnichannel capabilities. The company’s e-commerce sales increased 175% year-over-year and represented approximately 19% of net sales in 2020. Given its robust business capabilities, SCVL is uniquely positioned to capitalize on the strong industry tailwinds.
Favorable Analyst Estimates
A $1.40 consensus EPS estimate for the quarter ending April 30represents a 220.7% improvement year-over-year. Furthermore, in its fiscal year 2021. its EPS is expected to increase 253.6% from the same period last year. Also, analysts expect the company’s revenue to increase 76.8% in the current quarter, 12.2% in the current year and 2.9% in fiscal 2022.
SCVL’s net sales increased 5.8% year-over-year to $253.9 million in the fourth quarter ended January 30. Its operating income grew 121.2% from the year-ago value to $10.57 million, while its net income increased 113.7% year-over-year to $7.44 million. The company’s EPS rose 116.7% from the prior-year quarter to $0.52. SCVL’s gross profit margin increased to 30.8% compared to 29.1% in the fourth quarter of 2019.
Consensus Rating and Price Target Reflect Potential Upside
Of two Wall Street analysts that rated SCVL, one rated it a Strong Buy and one rated it Buy. The stock has an average broker rating of 1.5, indicating favorable analyst sentiment. Also, analysts expect the stock to hit $63.33 soon, indicating a potential 2.7% upside.
POWR Ratings Reflect Solid Prospects
SCVL has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. SCVL has a Growth Grade of A, consistent with its strong revenue and earnings growth potential.
Also, in terms of Value Grade, SCVL has a B. Its 15.30x forward P/E, which is 21.8% lower than the 19.57x industry average, is in sync with this grade.
The stock has gained 183% over the past year, which is reflected in its A grade for Momentum.
Click here to see the additional POWR Ratings for SCVL (Quality, Stability, and Sentiment).
The stock is ranked #3 of 66 stocks in the B-rated Fashion & Luxury industry.
If you’re looking for other top-rated stocks in the same industry, with an Overall POWR Rating of A or B, you can access them here.
SCVL’s consumer-centric strategies and strong omnichannel capabilities have contributed to its robust sales growth. As emerging trends and opportunities continue to fuel the retail space, we expect SCVL to continue driving steady growth in its financials and profitability.
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SCVL shares were trading at $62.96 per share on Thursday morning, up $1.30 (+2.11%). Year-to-date, SCVL has gained 61.42%, versus a 12.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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