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Executives

Clifton E. Sifford - Chief Executive Officer, President and Director

W. Kerry Jackson - Chief Financial Officer, Chief Operating Officer, Executive Vice President and Treasurer

Analysts

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

Scott D. Krasik - BB&T Capital Markets, Research Division

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Jeffrey S. Stein - Northcoast Research

Sam Poser - Sterne Agee & Leach Inc., Research Division

Mark K. Montagna - Avondale Partners, LLC, Research Division

Shoe Carnival (SCVL) Q4 2012 Earnings Call April 1, 2013 4:30 PM ET

Operator

Good afternoon, everyone, and welcome to Shoe Carnival's Fiscal Year 2012 Fourth Quarter Earnings Conference Call. Today's call is being recorded and is also being broadcast via live webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited.

This conference may contain forward-looking statements that involve a number of risk factors. These risk factors could cause the company's actual results to be materially different from those projected in such statements. These forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's SEC filings and today's press release. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date.

The company disclaims any obligation to update any of the risk factors or to publicly announce any revisions to the forward-looking statements talked about during this conference call or contained in today's press release to reflect future events or developments.

In the company's earnings release and in their prepared remarks on this call, the company will refer to adjusted earnings per diluted share for the fourth quarter of fiscal 2012, which financial measure has not been calculated in accordance with United States' generally accepted accounting principles or GAAP. This non-GAAP measure eliminates the impact of the special cash dividend paid by the company in December 2012 to earnings per diluted share in that quarter. The company believes that adjusted earnings per diluted share for the fourth quarter of fiscal 2012 is a useful measure of its performance and allows the company and investors to analyze the financial and business trends related to the company's results of operations separate from the impact of the special cash dividend. More information on this non-GAAP financial measure, including a reconciliation to the company's GAAP results, is included in the company's earnings release.

I will now turn the call over to Mr. Cliff Sifford, President, Chief Executive Officer, for opening comments. Mr. Sifford, please begin.

Clifton E. Sifford

Thank you, and welcome to Shoe Carnival's Fourth Quarter and Fiscal 2012 Earnings Conference Call. Joining me on the call today are Kerry Jackson, Senior Executive Vice President, and Chief Operating and Financial Officer; and Tim Baker, Executive Vice President of Store Operations.

Before we begin, I'd like to remind everyone, fiscal 2012 consisted of 53 weeks while fiscal 2011 consisted of 52 weeks. References to annual comparable store sales for the comparable 52-week period ended January 26, 2013. In addition, the fourth quarter of 2012 consisted of 14 weeks, while the fourth quarter of 2011 consisted of 13 weeks. References to fourth quarter comparable store sales are for the comparable 13-week period ending January 26, 2013.

For today's call, I'll review the company's overall performance and provide some insight into the coming year, and Kerry will review the financial side of the business. We will then open the call to take your questions.

As you're all aware, the fourth quarter was a tough one for us, but we still reported record sales and earnings after -- for the year. After posting record earnings for the first 3 quarters of 2012, we experienced unseasonably warmer weather from the first week of November through the third week of December, and this played a major role of suppressing sales of seasonal product in the fourth quarter. Once more seasonal weather arrived in the latter part of December through January, sales of seasonal product escalated.

The government's delay to act on tax policy and their subsequent decision to raise payroll tax withholding rates had an immediate impact on our consumers. The decision the IRS made to delay accepting tax returns until January 30 also had an immediate and calculable impact on our sales results for the last 10 days of the quarter. And as a result, comparable store sales for the fourth quarter increased only 0.5%.

Although traffic for the quarter was down mid-single-digits and conversion was down approximately 1%, our average transactions were up mid-single-digits, driven entirely by average unit retail. Our merchants did a good job of managing through the seasonal product and, as a result, the gross profit margin of 29.3% was 100 basis points higher than the fourth quarter last year. Unfortunately, we were not able to leverage our expense structure under this lower-than-anticipated sales volume and reported adjusted earnings per diluted share of $0.16 as comparable to last year. GAAP earnings per diluted share for the fourth quarter of fiscal 2012 were $0.13. Kerry will provide more detail on the difference between the GAAP and the adjusted earnings per diluted share.

While we are disappointed on our fourth quarter results, we're very proud of our many achievements in fiscal 2012. Achieving $855 million in sales was a record. Our operating income was 14% higher than our previous record high in fiscal 2010, and our $1.43 in diluted earnings per share was 4% higher than our previous record in fiscal 2010. These results were driven primarily by our 4.5% comparable store increase along with a 63-basis-point improvement in gross margin as compared to the same period last year. The past 3 years represent the first-, second- and third-highest earnings per diluted share in the company's history. Our customers continue to respond well to our business model of providing the right product assortment for the entire family at a compelling value.

Our positive sales results for the year were broad-based, with every major department reporting a comparable store sales increase. The best-performing categories were sport casuals for men and women, along with athletic for men, women and kids.

We ended the year with inventory up approximately 6.7% on a per-store basis due to the combination of higher average unit costs, a later Chinese New Year which forced us into January deliveries of Easter shoes, product for our 12 new stores that opened in March of 2013, as well as a decrease in athletic sales the last 2 weeks of the year. Our merchants continue to do a good job of managing our overall inventory.

Moving on to merchandise. In our women's nonathletic department, comparable store sales for the fourth quarter were down low-single-digits, with losses incurred in dress shoes, tailored casuals and boots. Looking further at our boot performance, we grow very strong increases in the riding boots, western boot and booty classifications. Increases in these classifications were not enough to overcome the loss in sport boots and weather boots. It is important to point out that our women's boot inventory, excluding western, ended the quarter down in the mid-teens. Dress shoes continue to be a challenge as pumps seemed to be the only category that is showing consistent strong growth. We're continuing to see nice comparable store sales increases from nautical, vulcanized canvas and molded footwear. For the fiscal year 2012, women's nonathletic comparable store sales were slightly positive.

With the addition of our new GMM, Carl Scibetta, to our executive team, we are strategically analyzing the product offering in our women's nonathletic department. During 2012, we conducted quite a bit of research on our customer that pointed to a void we believe we can successfully fill.

To begin that process, we have identified about 20% of our stores where we will begin to test better brands, which offer great fashion-right product at price points that will be compelling to the mom we know is shopping for her husband and children. We are in the process of designing a visual program that will highlight this product for the customer as soon as she enters our store. We are very excited about the opportunity to capture this important customer who is already shopping in our stores for her athletic shoes and for her family.

For competitive reasons, I won't identify the brands we are adding but product will begin arriving for third quarter sales, and we will keep you posted on the progress.

In our men's nonathletic department, we ended the quarter with a very low single-digit decline on a comparable basis. This loss was driven entirely by low double-digit loss in the fashion boot categories. Sandals, nautical and western boots all posted double-digit sales increases on a comparable basis. For the fiscal year 2012, men's nonathletic comparable store sales increased low single digits.

Our children's business ended the quarter with mid-single-digit comparable store sales increase. This increase was driven primarily out of girls' and boys' athletic. In addition, we also saw increases in the sandal and girls' campus casual categories. For the fiscal year of 2012, children's comparable store sales increased high-single-digits.

In adult athletics, comparable store sales were up low-single-digits for the quarter. The classification of product driving the gains in adult athletic for the fourth quarter were women's skate, men's and women's performance running and men's retro basketball. Color continues to perform, and we continue to like the excitement it brings to our assortments. For the fiscal year of 2012, adult athletics comparable store sales increased mid-single-digits.

Turning now to store expansion. For 2012, we opened up 31 stores and closed 7, ending the year with 351 stores in 32 states and Puerto Rico. As you all know, we entered 2 major markets, Dallas, Texas with 7 stores and Puerto Rico with 4. We are pleased with the performance of both of these markets, and we will spend the next few years filling in these markets so they can reach their full potential.

Looking ahead for 2013, our plans call for opening 30 to 35 stores, and we could potentially close 5 to 7 additional stores. Three weeks ago, we celebrated the grand opening of 12 new stores. We are very pleased with these grand openings, and we look forward to July for our next wave of openings.

During 2013, our strategy is to open stores in existing large and medium-sized markets to leverage our advertising cost or in small new markets where advertising costs are more affordable.

During fiscal 2013, we will relocate 7 stores to better location in the same markets, 3 of those 7 stores celebrated their re-grand opening in mid-March. We will continue to review opportunities in our legacy stores to upgrade our store locations in existing markets as leases come up for renewal. Additionally, we continue to reinvest in our existing store base, focusing on in-store graphics, including signage updates to focal walls and in caps.

Also in fiscal 2013, dependent upon successful lease negotiations, we plan to remodel approximately 30 stores. Reinvesting in our existing store base combined with strong marketing and advertising campaigns will continue to make Shoe Carnival the footwear destination for the family.

Our management team will continue to review our annual store growth rate based on our view of internal and external opportunities and challenges in the marketplace. We believe our strong, unleveraged financial position leaves us well-positioned for additional square footage growth over the next several years. The effort of our entire Shoe Carnival team, from our corporate headquarters to our store associates, continue to be tremendous as we execute on our robust store growth strategy.

Moving to e-commerce. We just completed our first fiscal year with our e-commerce site. We were able to improve the capabilities of our site throughout the year by adding sites for mobile and tablet use and we just recently began rolling out a kiosk program in certain of our smaller-volume stores to help increase sales and meet customer expectations. Although we don't report e-commerce sales separately, we are pleased with the sales increases we are experiencing.

Now I'd like to address our current sales trend. Last year at this time, we were enjoying the results of an extremely early spring season across our entire chain. The early sales of sandals and athletic product assisted in keeping margins at an acceptable level while we executed the final clearance of fall product. This year, we have experienced cold, wet weather across the chain, although not as severe in the South as in the Midwest and the North Midwest. As a result, we have experienced robust sales in our fall and winter boot and shoe categories and much slower sales in our spring sandals and athletic categories. The lack of sales in the higher-margin categories has resulted in margins that are 140 basis points lower than this time last year. In addition, we are projecting that quarter-to-date sales will be down at the end of March in the mid- to high-single-digit range.

With improving weather pattern on the horizon, we believe April is an opportunity for a better trend, and we are projecting comparable store sales for the quarter will be down between low- to mid-single-digits. At the same time, we are pleased to report our southern region has generated mid-single-digit comparable store sales increases, with every merchandise department reporting gains. This leaves us confident that as more seasonal weather arrives across our markets, we are well-positioned with the right product assortment to meet the spring footwear needs of our customers.

Based on the performance of our southern stores and the belief that spring will eventually arrive, we are expecting second quarter comparable store sales to increase low- to mid-single-digit.

Lastly, I'd like to talk about our new marketing initiative. As I mentioned earlier, we have, over the past year, done extensive research on our customer and how she interacts with us, either digitally or in our brick-and-mortar stores. We studied her wants, her likes and her dislikes of our store experience, our marketing campaign and our product selection.

I'm happy to report that, for the most part, our customers love us. They like the broad assortment, the depth of sizes and the exciting store experience. Through this research, it became evident to us that we had an opportunity to better communicate to our new customers, especially in new markets, to educate them on what makes Shoe Carnival a unique and differentiated place to shop for family footwear.

With that in mind, our marketing team, along with our advertising agency, went to work to build a campaign around in-store experience. It is too early to talk about results of this campaign, but if you would like to experience a campaign for yourself, you can review our -- you can view our brand spot as part of the Shoe Carnival's Facebook page.

In addition, we have strengthened our digital campaign which allows us to reach an expanded market area at an affordable cost. And most importantly, I'm very happy with the progress of shoe perks, our loyalty program. We relaunched this program in late 2011. And to date, we have seen sales from our loyalty members grow from 8% of our total sales to over 15% of our total sales. These members shop us more often and, on average, spend almost 40% more than nonmembers. We have set a very aggressive goal of doubling the number of Shoe Perks members by the end of 2013.

This completes my prepared remarks, and now I'd like to turn the call over to Kerry Jackson for details on our financial results.

W. Kerry Jackson

Thank you, Cliff. Our net sales for the 14-week fourth quarter increased $23.8 million or 13.1% to $205.7 million as compared to $181.9 million in the 13-week fourth quarter of fiscal 2011. Comparable store sales for the 13-week period ended January 26, 2013, increased 0.5%.

Of our $23.8 million increase in net sales, $14.5 million was from the increase in sales generated by new stores opened since the beginning of the fourth quarter last year, $10.7 million was recorded in the extra week, and $890,000 was the comparable store sales increase.

These increases were partially offset by a $2.3 million loss in sales from the 8 stores closed since the beginning of fourth quarter of fiscal 2011.

The gross profit margin for the quarter increased 1% to 29.3%. Our merchandise margin increased 1.4%, and buying, distribution occupancy costs increased as a percentage of sales by 0.4%. The increase in buying, distribution and occupancy cost was primarily in our occupancy cost. Typically, we need 2% to 3% comp increase to leverage our occupancy costs.

Selling, general and administrative expenses increased $8.4 million in the fourth quarter of fiscal 2012 to $54.9 million. The increase in SG&A was due in part to a $4.6 million increase in expenses for new stores, net of expense reductions for stores that have closed since the beginning of fiscal 2011. In addition, we experienced an increase in incentive and equity compensation of $1.1 million due to company's improved financial performance.

As a percentage of sales, SG&A expenses increased 1.2% as we are unable to leverage the increase in expenses due to our lower-than-expected comparable store sales increase.

The effective income tax rate for the fourth quarter of fiscal 2012 was 38.2% as compared to 33.9% for the same period in fiscal 2011. The rate was significantly lower in fiscal 2011 due to the favorable resolution of certain tax positions.

Net earnings for the fourth quarter of fiscal 2012 were $3.2 million or $0.16 in adjusted earnings per diluted share as compared to net earnings of $3.3 million or $0.16 per diluted share in the fourth quarter of 2011. Earnings per diluted share for the fourth quarter of fiscal 2012, computed in accordance with GAAP, were $0.13.

While our payment of a $20.4 million special cash dividend in December 2012 had no effect on fourth quarter or annual net income or annual diluted earnings per share, the results for the fourth quarter fiscal 2012 included a $0.03 reduction in earnings per diluted share due to the application of the 2-class method of computed earnings per share in connection with this dividend.

We have included in our earnings release today a GAAP to non-GAAP reconciliation table illustrating and describing the adjusted earnings.

Now I'd like to transition to our fiscal 2012 financial results. Net sales increased $92.5 million to $855 million for fiscal 2012, a 12.1% increase over net sales for fiscal 2011. Comparable store sales for the 52-week period ended January 26, 2013, increased 4.5% compared to the 52-week period ended January 28, 2012.

Of our $92.5 million increase in net sales, the 48 new stores opened since the beginning of fiscal 2011 and our e-commerce operations contributed $58.2 million in increased sales. Sales also increased within our comparable store base by approximately $32.7 million, and $10.7 million were recorded in the extra week of fiscal 2012. These sales increases were partially offset by a decline in sales of $9.1 million from the 11 stores closed since the beginning of fiscal 2011.

Gross profit increased $32.6 million to $257.5 million in fiscal 2012. The gross profit margin in fiscal 2012 increased to 30.1% from 29.5% in the prior fiscal year. Our merchandise margin increased 0.4%, while buying, distribution and occupancy costs as a percentage of sales decreased 0.2%.

Selling, general and administrative expenses increased $26.3 million in fiscal 2012 to $209 million. The increase in SG&A was due in part to a $17.1 million increase in expenses for our 48 new stores net of 11 stores closed in the beginning of fiscal -- since the beginning of fiscal 2011 and our e-commerce initiative.

Additionally, we experienced an increase in incentive compensation of $3.9 million due to our improved financial performance, as well as an unusually high increase in self-insured health care cost of $1.8 million. Also included was a net expense of $1.2 million related to Mark Lemond's retirement.

Total preopening costs for fiscal 2012 were $4.1 million, an increase of $2.4 million over last year. Of the total preopening costs incurred in fiscal 2012, $2.7 million was included in SG&A and $1.4 million was included in cost of sales for preopening rent and freight. In fiscal 2011, we incurred $1.8 million of preopening expense, of which $1.2 million was included in SG&A and $637,000 was included in cost of sales.

During fiscal 2012, we opened 31 new stores for an average preopening expense of $133,000 per store. During fiscal 2011, we opened 17 new stores at an average of $108,000 per store. The increase in the average expense through new store was primarily a result of increases in preopening freight, particularly in Puerto Rico, and advertising.

Our effective income tax rate for fiscal 2012 was 39.2% as compared to 37.1% for the fiscal 2011. Approximately 1.3% of the increase in our effective tax rate between comparative periods was due to the nondeductible portion of compensation attributable to Mark Lemond's retirement.

Net earnings for fiscal 2012 were $29.3 million or $1.43 per diluted share compared to net earnings of $26.4 million or $1.31 per diluted share last year. As Cliff noted at the beginning of the call, the $1.43 per diluted share represents a new company record.

In addition to the sales and earnings records we achieved from fiscal 2012, there are several other significant items that occurred for Shoe Carnival. We completed the 3-for-2 stock split of the shares of our common stock, which was the effective form of stock dividend during April 2012. These increased our shares outstanding of approximately 13.6 million to approximately 20.4 million. We initiated our first ever quarterly dividend, cash dividend of $0.05 per share to our shareholders during the second quarter of fiscal 2012.

A special cash dividend of $1 per share was also paid to our shareholders during December 2012. In total, we returned $23.5 million to our shareholders in fiscal 2012 through our quarterly and special cash dividends. Also during fiscal 2012, we returned additional capital to our shareholders through the repurchase of approximately 220,000 shares of our common stock for a total investment of $4.7 million.

Now turning to our cash position information respecting cash flow. Depreciation expense was $4.2 million for the fourth quarter and $16 million for the full fiscal year. During fiscal 2012, we expended $26 million for the purchase of property and equipment, of which $21.5 million was for construction of new stores, re-modeling and relocations. Lease incentives received from landlords were $7.2 million. We opened 31 new stores, relocated 6 and closed 7 stores during fiscal 2012. We remodeled approximately 5% of our store base.

In fiscal 2013, capital expenditures are expected to be between $28 million to $29 million. Approximately $12.5 million of total capital expenditures are expected to be used for new store construction, $2.5 million used for store relocations and $8.3 million will be used to remodel approximately 10% of our existing store base. Lease incentives we received from landlords are expected to be approximately $8 million to $8.5 million.

We currently have $20.3 million available under our authorized share repurchase program.

My final comments today will focus on sales and earnings expectations for the fourth -- first quarter of fiscal 2013.

We expect first quarter net sales to be in the range of $226 million to $232 million, with comparable store sales decrease in the range of 2% to 4%.

Earnings per diluted share in the first quarter fiscal 2013 are expected to be in the range of $0.36 to $0.44. In the first quarter of fiscal 2012, comparable store sales increased 7.3% and the company earned $0.54 per diluted share.

Included in the earnings estimates for the first quarter is the expectation that our gross profit margin will decline from 120 to 160 basis points, and SG&A will deleverage due to the comparable store sales decline from 50 to 120 basis points.

One additional point on fiscal 2013. Due to the 53-week period in fiscal 2012, the fiscal 2013 calendar ends 1 week later than it did in 2012. While the shift affects each quarter during the year, it is most apparent in Q2 and Q3. Let me explain.

Last year, our second quarter ended on July 28, and the very next week, the first week of Q3, our back-to-school sales accelerated significantly.

Due to the calendar shift, in 2013, our second quarter will end on August 3, thereby, pulling in those sales for back-to-school in the second quarter this year and out of Q3.

If the Q2 calendar was restated to 52 weeks and -- to reflect the 2013 ending dates, we would reduce -- we would decrease sales in Q1 last year by $900,000, increase Q2 sales by $17.6 million, decrease Q3 sales by $21 million and decrease Q4 sales by $11.7 million. The net effect of the calendar shifts and having 1 less week will reduce prior year's sales by $16 million.

This concludes our financial review. Now, I'd like to open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll take our first question from Jill Caruthers with Johnson Rice.

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

If you could talk about last year, in the first quarter, your merchandise margins were impacted, I believe, 70 basis points down given some heavy fall boot liquidation you did. Just I know sales are weak quarter-to-date this year, but could you talk about the greater pressure on the gross margin that you're forecasting?

Clifton E. Sifford

Jill, this is Cliff. The margin from last year was -- may have been impacted somewhat from the final boot liquidations in February, but they were held up by the strong sales of very high margin sandals and boots. If you remember, I think we talked about it, you may have even asked a question but talked about it last year as that we shipped sales out of second quarter in the first quarter in sandals with the warm weather, we weren't sure whether that had happened or not, but it was evident as the year -- as the spring moved on that we had indeed shifted sales out of the second quarter into the first quarter. This year, just the opposite has happened in our opinion as that we've shifted sales out of February and March and more into April and May due to the cold weather. Unfortunately, because we weren't able to sell the high-margin sandals and, in some cases, our high-margin athletic shoes, the sale of fall product and boot product in that final clearance stage drove the margins down early in the quarter. Long-winded response to your question, but that is exactly what happened.

Jill R. Caruthers - Johnson Rice & Company, L.L.C., Research Division

Okay. And if you could talk a bit more about the opportunities you see in the women's nonathletic. I believe you said 20% of your store base will receive some of this new product. And could you talk about maybe, is it more units or a higher price point that you think is the opportunity in that select category?

Clifton E. Sifford

So what we're going to do, and I'm glad you asked that question, what we're going to do is -- we've gone to -- Carl has been on the road with some of the brands actually over the past several years that we kind of coveted ourselves, and he has been able to talk to these brands and sell them to us at prices in which we can do the business. And it's really in the casual and sport casual category. We don't demand a high retail price out of our dress shoe assortment, but we can get higher price points out of casual and sports casual. One of the largest brands at -- one of the best brands we carry in our sport casual category is Clarks, and if you take that product and you add additional brands around it from the department stores, that's the kind of brands that we're talking about. It will be casual in nature. It's that mom who's coming in here with -- coming into our stores with her kids and her husband and she's able to buy our athletic shoes from us and she's buying her kids shoes and she's buying her husband shoes, she's just not able to find those sport casual and casual shoes that she would normally find at a department store.

Operator

We'll take our next question from Scott Krasik with BB&T Capital Markets.

Scott D. Krasik - BB&T Capital Markets, Research Division

So Kerry, should I chalk the 140 basis point merch margin improvement to just an easy comparison from 1 year ago? Or were there some other things that you did, to get that improvement?

W. Kerry Jackson

The -- for the year, you're saying?

Scott D. Krasik - BB&T Capital Markets, Research Division

No, in Q4. Didn't you say it was up 140 bps in Q4, the merchandise margin increased 1.4%?

W. Kerry Jackson

Yes. It was primarily a seasonal product. If you remember, in Q4 last year, we ended up getting out-positioned in our boot category. And we also had weather issues, if you remember. The weather didn't cooperate. For 2 years in a row, we have had a warmer than expected November-December timeframe. We also had bought our boot inventory, thinking prices -- department stores will take the prices up and we took our prices up. What happened, as they took their prices down and got down and dirty, now we ended up having to liquidate those boots at a significant margin. If you remember us talking at our Q3 call, is that we're going to have to get aggressive and mark those boots down to get rid of them and we were going to do it while the customers are shopping in December. And we did that and we came out of the quarter reasonably clean, compared to the position we had last year. Now this year, it was a totally different position. We were not going to be out-positioned either when the department stores opened for a day after, nor were we going to be out-positioned on price points on boots. We also shifted our inventories to be -- have a larger percentage in the western and...

Clifton E. Sifford

Riding boots.

W. Kerry Jackson

And the riding boots -- thank you, Cliff. I probably shouldn't be talking about merchandise as much as I am. But we were better positioned in the seasonal product even though we did not get weather to support the sales of that, we did have a better -- significantly better day after because we were much better positioned from a price point on the boots and in the fashion content of it. So it was a combination of factors that drove that better gross profit margin in Q4.

Scott D. Krasik - BB&T Capital Markets, Research Division

But in terms of projecting it, it was more just yet a very easy comparison in Q4 from the year before because of those seasonal issues?

W. Kerry Jackson

Well, what I really say is the comparison plus we had a much better merchandise assortment. We went into the quarter much better prepared to take advantage of the sales we had during the quarter.

Clifton E. Sifford

Scott, additionally, we were able to buy -- because we focused our boot buy and it really revolves around boots, but because we focused our boot buy on a more narrow -- narrower selection, and we were able to derive better costs on our boots. So that if we had to get as low as we did 1 year ago, we would benefit from lower margins. The fact is we did not have to go as low from a pricing standpoint. Once the weather cooled down, we were able to drive a higher average outdoor price on our boots.

Scott D. Krasik - BB&T Capital Markets, Research Division

Okay. And then, it gets a little nuance-y, but obviously, back to school's been shifting later, so thank you for that detail that Q3 would be impacted by $21 million. But is there any way to look at it from -- I would assume 2 years ago, it was probably greater than that, so to the extent that, we're shifting out another year, shouldn't it be less than that $21 million that would have been impacted last year because people are just shopping closer to the schooltime?

Clifton E. Sifford

Well, that's a great question. And the issue with that, the issue with answering that question is we don't know when schools are going to start yet. One of the reasons that shifting later is that schools are shifting later. In North Carolina, for instance, I'm going to give you -- for instance, say, you can't open up the schools before the 25th of August. In the past, one of the shifts that you just mentioned was that those schools opened up on around the 4th or 5th of August. You take that in consideration along with tax-free, which has also shifted a little later, and we don't know when those dates are yet because each year, they have to be approved by each state legislator, and we just don't know yet. So what we're telling you is what we know and hopefully by the time we do our second -- our first quarter conference call, we can give you a bit more guidance.

Scott D. Krasik - BB&T Capital Markets, Research Division

And relative to the numbers you gave though, that's sort of a guide -- I mean, it shouldn't be more -- things shouldn't shift earlier. I mean there's no evidence of that.

Clifton E. Sifford

No, we don't anticipate it shifting earlier. We do anticipate that there are shifts that will be slightly later.

W. Kerry Jackson

So Scott, what we were trying to do is better projecting out what the sales differences would be for Q3 this year. We were trying to restate the prior-year, so fiscal 2012, restating those for the calendar changes we'll experience. So you at least have a baseline to understand the effect to last year's sales, and then you can project off of that.

Scott D. Krasik - BB&T Capital Markets, Research Division

Yes, okay. And then just last -- thanks, Kerry. And just last, Cliff, how meaningful-- you alluded to basketball I think once or twice in your script, I mean how meaningful is this basketball shift to your customer and the brands and styles that you carry? And then, what does that imply for running -- for back to school this year?

Clifton E. Sifford

Well, no questions -- no problem. Basketball is really important to our customer. You know about between -- right around 34% of our business is African-American or Hispanic, and we do a great court business, whether it's a basketball or whether we -- you want to look at what we term as fashion basketball, which is more retro in nature. We do a good business. Now, basketball this year was all about launches on the mall. But even with that, in the fourth quarter, we had a pretty good basketball run going. What affected us in the first quarter however, is the lack of tax refund checks, and that directly affected our basketball business negatively. Now as you move forward in the back-to-school, we still feel very strong about running, especially the performance running category and not necessarily technical running, but strictly, the performance running and all the color that's there, we've looked at all our -- in fact, we've already placed orders on all our major brands and we are very excited about that category as we move forward in the back-to-school.

Operator

We'll take next, Chris Svezia with Susquehanna Financial Group.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Kerry, I'm just curious, could you just -- that the SG&A delever in the first quarter, can you say that number again? You said it was down, how much, 50 to...

W. Kerry Jackson

We're expecting the 50 to 120 basis points in Q1 and that's based on a 2% to 4% comp store decline. So it's really in relationship -- we opened a lot of stores in Q1, so we've incurred a good chunk of preopening costs. And the real difference between -- it wasn't that we overspent on our SG&A, it's really the lack of sales productivity because we haven't been able to get those spring sales. Last year, when we shifted to sales into Q1, it helped to offset the increase in the preopening costs last year.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. And then the gross margin being down that much is just because you're selling more clearance product, your spring high-margin business hasn't kicked in yet? That's part of the reason why the gross margin is down that much, correct?

Clifton E. Sifford

That's exactly right. 100% right, as a matter fact.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. So then I guess, Cliff, for you, I mean, do you start to -- I mean at some point in time, do you feel like you need to cancel on the on orders, do you need to -- I don't know, do you get any concerns about if and when the weather comes, and if -- or at this point, I'm sure, pretty confident about your inventory position right now?

Clifton E. Sifford

We -- two issues. First of all, we don't believe -- we truly believe that we shifted sales out of the second quarter into the first quarter last year, we really believe that. We believe that this is, actually -- although it's the coldest March in some time up here, but we actually believe that it's more normalized early spring. And that as soon as spring arrives, when it does and as you just said, if it does, we believe we'll sell sandals and we'll sell running products again just the way we have in the past. As far as canceling product, we -- a good bit of our business is done on a first call's basis so a lot of that product is either here or on the way here. Any product that has not been bought on first cost basis, we're reviewing all of that product to see if we feel we're heavy or not. But to be honest with you, Chris, we're really not going to know the answer to that until we actually get our first warm week, which we have not experienced to date.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. Switching gears, just any thoughts about pricing and average selling prices this year versus last year? What you anticipate, increases? Just any thoughts around that.

Clifton E. Sifford

We think we're going to increase our average outdoor price, low single-digit. I don't believe that we have not seen the kind of cost increases we've seen in the past. So we believe prices are going to remain stable.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

And some of the work you're doing on the women's nonathletic piece to the business, which you anticipate for the fall, is that -- I mean a price that you can sell at, how is that in relation to your existing women's nonathletic pricing at this point, basically the same, it's quite like...

Clifton E. Sifford

No, as higher than what we're averaging out the door in women's nonathletic, because women's nonathletic includes sandals and dress shoes, which we don't -- which don't demand higher prices. These were casual and sport casual products, which we'll sell under $50, but well above our average out the door price of women's.

Operator

Next, we'll take Jeff Stein with Northcoast Research.

Jeffrey S. Stein - Northcoast Research

So, for Cliff and Kerry, if you have this sales shift out of Q1 and to Q2 because of the weather, I presume that your margins will still be impacted because the later you sell into the season, I presume you're going to have to take greater markdowns. So even if the sales come later, would you incur a margin hit in Q2?

W. Kerry Jackson

We don't want to give guidance for Q2, but I would be glad to give some directionality. We do expect to see our gross profit margin, inclusive of buying distribution occupancy, to be flat to slightly up depending on the level of sales productivity we have.

Jeffrey S. Stein - Northcoast Research

Okay. And basically, what you're saying on the sales shift because of the calendar is that we should be looking at adding -- what normally you would see in second quarter, we should add about $17.5 million?

W. Kerry Jackson

Yes. And then -- in last year's numbers, so you can build your model off of it, you'd be shifting $17 million into Q2 because of the calendar shifts, and you may shift about $21 million out of Q3.

Jeffrey S. Stein - Northcoast Research

Right. Of last year's number, right. How much did the extra week add to earnings per share?

W. Kerry Jackson

It was extremely nominal, very immaterial. And to add a little color on that, in prior years, we had seen a 3% to 4% -- $0.03 to $0.04 of EPS out of that. Because of that, last week was the week that was very much affected by the athletic sales that Cliff spoke about earlier, that the 10.7 was not very productive level of sales in that week, and therefore, it became immaterial in any EPS accretion.

Jeffrey S. Stein - Northcoast Research

Okay. You mentioned that you're seeing a sharp increase in your Shoe Perks program, I'm just kind of curious, can you disclose how many members you have at year-end and how that compared with prior year?

Clifton E. Sifford

I can't disclose -- I'm not going to disclose how many we had at year-end. I can just tell you that we have -- we've grown it from 8% of our total sales, almost doubled it to 15% of our total sales. And we think -- I'm just going to be honest with you, Jeff, we are behind our competition here and we got a late start to this program, but it is -- it probably is our #1 focus from a marketing standpoint today is to get our Shoe Perks members up to above 50% of our total sales.

Jeffrey S. Stein - Northcoast Research

Great. And Cliff, I'm wondering if you could possibly discuss the performance of your new markets this past year? I know you mentioned that Dallas and Puerto Rico, you were satisfied, but when you look at how those stores performed relative to, let's say, stores outside of the market and then look at your class of 2011 and 2010, how did those stores perform relative to what you would normally expect from a new store? And maybe, using it as a benchmark, say, for example, your average new store does 70% to 75% of what a mature store does, how would it have stacked up on that basis?

Clifton E. Sifford

I think -- let me -- I think I understand your question here. It takes about 3 years for a store to ramp up to our average store size, okay? So we do start off and we're not disappointed at all on our 2012 stores, they all started pretty much exactly the same way with the exception of 1 or 2 markets that's actually launched higher than this rate, but about 70% to 75% of our total, and then it ramps up the next year and then the third year, they usually -- is when we expect it to hit the normal. Last and 2012, it was no different than that.

Jeffrey S. Stein - Northcoast Research

Okay. So you were in that 70% to 75 range in both Puerto Rico and Dallas? Or was one better than the other?

Clifton E. Sifford

No, no, I don't want to get down to specific markets, Jeff. All I can tell is that we had some markets that performed much better than others, and just -- no, just so not to get market specific with it.

Jeffrey S. Stein - Northcoast Research

Sure. Can you tell us how many of your 31 new stores this year, Cliff, will be in Dallas and how many will be in Puerto Rico?

Clifton E. Sifford

Right -- today, our plan is -- we have identified -- now remember, we're still looking for this year, but we've identified 1 additional store in Dallas and 2, and we think 3 additional stores in Puerto Rico.

Jeffrey S. Stein - Northcoast Research

So your -- as of today, you would finish this year with 8 stores in Puerto Rico and maybe 6 to 7 -- excuse me, 8 stores in Dallas?

Clifton E. Sifford

That's correct, and 6 or 7 stores in Puerto Rico.

Operator

Next, we'll move on to Sam Poser with Sterne Agee.

Sam Poser - Sterne Agee & Leach Inc., Research Division

Guys, I have a lot of questions. I just want to understand this. I just want to talk about the 53rd week effect, so if it's $17 million off the $182 million you did last year, you're basically shifting -- you've got about a 9.5% positive help to Q1 versus last year, and about -- on a comp basis. And about a -- give or take -- and about a 9.5 hurt to -- but you did Q2 and about 9.5% hurt to Q3, if I'm thinking -- from a revenue perspective, if all other things being equal, forget about the new stores and all that other stuff.

W. Kerry Jackson

Well, that should calculate -- that's why we're giving you the numbers so you can calculate what -- rather than -- we're not giving guidance at this point and at this time, so we'll let you put it in your model and let you calculate it from there. But yes, obviously, it's a significant shift, and that's why we're highlighting those numbers. We'd rather give you the exact numbers than a percentage.

Sam Poser - Sterne Agee & Leach Inc., Research Division

But I mean -- but my question there is though if the -- so in Q2, you could have -- you could run a flat comp and have revenues up a lot just because of the calendar shift?

W. Kerry Jackson

Well, keep in mind, from a comp standpoint, we are going to shift the -- when we report a comp to you we'll report it on a comparable week-to-week basis. So like you just said, the comp could be relatively flat, and we could still have a significant increase in Q2 and overall sales from the standpoint that we're shifting the weeks that was in the quarter.

Sam Poser - Sterne Agee & Leach Inc., Research Division

So on a flat comp, you would -- I mean, you would see big leverage in occupancy and big leverage -- in occupancy both on the -- and on SG&A, while in Q3, if you ran a flat comp, it would go completely other direction. You would delever both of those, quite a lot, on a flat comp, just because of the shift of the...

W. Kerry Jackson

Well, I could characterize it as being a little, but yes, directionally, you're exactly right, is that because you're shifting a lot of sales into Q2 but the expenses aren't -- especially the fixed costs, now we'll shift some advertising into Q2 along with those sales for back-to-school, but the fixed costs like rent, you'll be able to leverage nicely in Q2. But then you'll have a harder time, depending what your comp is in the third quarter because of that shift in sales productivity.

Sam Poser - Sterne Agee & Leach Inc., Research Division

Right, okay. And then, how much -- all right, thank you. How much of the inventory did you -- like, versus last year, did you receive early, I mean of that -- that's a -- your inventory is quite high right now, how much of that inventory came in early because of the shift versus last -- shift of Chinese New Year? And could you tell us sort of has your inventory -- is your inventory more normalized at this point in the quarter?

Clifton E. Sifford

Well, Sam, here is what I can tell you on the inventory is that, we ended the year down in boots on a per door basis, just like I said in my prepared remarks. We ended the year actually flat to slightly down on a per door basis on fall product, sports shoes and such. And we ended the year up with athletic product, mainly because of the sales that we lost the last 2 weeks of the year. And we had more dress product, and more, what you would term Easter concept shoes going into the first part of the year. Now you asked about where we are today, we, ourselves, as we've been saying in the first quarter are down, so our inventories are not back where we want them to be. We need to -- we brought in -- we have sandals in the store now to sell. We have our athletic product as some of our running shoes still in stores. So we're not quite where we want it to be. We're continuing to work on it. But we anticipate that our inventories will be somewhat where they are today at the end of the quarter from a percentage up.

Sam Poser - Sterne Agee & Leach Inc., Research Division

But I guess my question is, is like, your sales were up slightly in Q4, but your inventory was up a lot more than your sales. Would you...

Clifton E. Sifford

What you're asking me is was the product pressured not fresh, and I can tell you that the product was fresh. That's the question I believe you were asking is, how much of the product from a -- the increase in inventory was aged and/or fall product, and I can't give you specifics on that, but I can just tell you that based against the previous year, it was down.

Operator

We'll take the next question from Mark Montagna with Avondale Partners.

Mark K. Montagna - Avondale Partners, LLC, Research Division

A few questions. I was just trying to understand in terms of your promotions. You had a good first -- your first quarter is obviously off to a weaker start. I'm trying to understand year-over-year because last year, you did so well, if you were to look at your promotions right now versus last year, would you say that you're promoting just as steep as last year or are you even steeper than last year at this point?

Clifton E. Sifford

We are promoting pretty much the same exact way we did last year, no steeper, no more aggressive at this point with -- and the reason for that, Mark, is that we truly believe that the issue is weather related, and as soon as we get some warm weather and we can start selling some sandals, then that will determine -- and open up footwear, that will determine whether or not we need to get more promotional. But at this point, it does us no good to get more promotional when the customer is not -- our customer, you followed us for some time, our customer buys today what she's going to wear tonight, it's a buy now and wear now kind of consumer. And she has not needed sandals and/or opened up footwear of any kind. So there is no reason to get more promotional on that product.

Mark K. Montagna - Avondale Partners, LLC, Research Division

Okay. And then with the tax refund checks that should be rolling in by now, have you seen any sort of positive impact from that? Is it even possible for you to determine that?

Clifton E. Sifford

That's a great question. And here's what happened, early in February, when the tax refunds weren't out, we saw a decrease in business, by the 3rd week of February, when tax refunds started to arrive, we saw a nice bump in business, and then the weather did turn very nasty from a snow and ice standpoint, and that business slowed down on us, so we have not seen the full effects of more money in the marketplace at this point.

Mark K. Montagna - Avondale Partners, LLC, Research Division

Okay. And then Kerry, what are your -- what are the comp leverage points this year in terms of occupancy and also SG&A?

W. Kerry Jackson

Well, it's going to be different than it would normally be -- and just like -- the conversation I was having with Sam about the shift in the sales productivity by quarter is going to change the normal ability to leverage activity. For example, while we could have a small comp in Q2 because we're shifting that big week of back-to-school into Q2 and there aren't as much into what significant expenses to follow it that we could see 150 -- approximately 150 basis points of leverage in SG&A in Q2, if you take into account the shift of those sales of $17.5 million moving them in to Q2. So that's what I'm saying that from a comp standpoint, we're going to give you the guidance 1 quarter at a time, but obviously, it's going to be a little different than it has been in prior years, what those leverage points are.

Mark K. Montagna - Avondale Partners, LLC, Research Division

Okay. And then just lastly, last year, Kerry, you gave really good detailed guidance on preopening costs and how that it would impact gross margin and SG&A. Do you -- can you walk us through maybe some similar details for this year? Because you're opening a lot of stores, but it seems like you should have in essence some opportunity on the cost line just because they're not new markets. I'm wondering if you can help us understand the positive benefits for this year.

W. Kerry Jackson

Well, one reason we went into it last year in such detail, it was going to be a significant hit to earnings because of the acceleration and the growth. We are going to probably spend approximately the same amount of preopening costs in 2013 than we did in 2012. However, there's not going to be that acceleration. So you can build in your model what was built into 2013 expense structure or preopening -- or '12 -- and was built into '12, is going to be about what we're going to spend in 2013. So I don't see -- so I didn't go into details on the numbers because I don't see it as a big penalty because it's already built into the expense structure. The difference -- even though we opened several large markets and they took a lot of preopening costs, what we're seeing now is that we're going to open -- we're going to invest in existing marketplaces with additional advertising. Like in Puerto Rico, where we opened those 2 to 3 stores, we're going to spend a significant amount of dollars to open those stores because we don't have market penetration to leverage that advertising yet, same in when we opened the 1 store in Dallas, we're going to see a significant amount of preopening costs in that market. In addition there, we're opening a lot of smaller markets or filling in smaller markets, where we'll still have a lot of advertising and other pre-opening costs, they won't be as high as on a per-store basis in those smaller markets that we saw in the prior years, but because there is more of them, more of those markets that we're going to be reinvesting in or smaller markets that we're going to open up, that's why the preopening costs are about the same.

Mark K. Montagna - Avondale Partners, LLC, Research Division

Okay, all right. And then just lastly, if you look out all the way to 2014, are you still looking at that year as the year of possibly opening up to 2 new markets?

W. Kerry Jackson

Yes, we are. We're exploring that right now and we feel, we feel comfortable we can get at least 1 large market and possibly 2. And if we don't get a large market opened, we'd be looking to open maybe some medium-sized market, 1 large and a couple of medium-sized markets. So we're still putting together our '14 plan. But that would be the expectation of it.

Operator

That does conclude our question-and-answer session. At this time, I'll turn it back over to Mr. Sifford for our final closing remarks.

Clifton E. Sifford

All right, thank you. Throughout my prepared remarks, I touched on several initiatives that we are working towards for 2013. I'd like to take just a second and highlight them once again.

We'll enhance our branded offering in women's nonathletic to capture the moms who are shopping our store for their athletic shoes and for the shoes for their kids and husbands. Number 2, we'll plan to add 30 to 35 stores in the existing medium to large markets or new small markets, backfilling existing markets will allow us to leverage advertising in markets that are underpenetrated.

We are reinvesting in our existing store base with 30 remodels and 6 relocations. And finally, we will introduce a reenergized marketing campaign that focuses on the family and showcases our exciting in-store experience.

We really do appreciate you joining us today and we look forward to speaking to you about first quarter results in May. Thank you, again.

Operator

And everyone, that does conclude our conference call for today. Thank you, all, for your participation.

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