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Shoe Carnival (NASDAQ:SCVL)

Q1 2013 Earnings Call

May 23, 2013 4:30 pm ET

Executives

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

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

Analysts

Kelly L. Halsor - BB&T Capital Markets, Research Division

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

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

Jeffrey S. Stein - Northcoast Research

Steven L. Martin - Slater Capital Management, L.L.C.

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

Operator

Good afternoon, and welcome to Shoe Carnival's Fiscal Year 2013 First Quarter Earnings Conference Call. Today's call is being recorded and is also being broadcast 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.

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

Clifton E. Sifford

Thank you, and welcome to Shoe Carnival's First Quarter 2013 Earnings Conference Call. Joining me on the call is Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer. For today's call, I'll give a high level review of the company's performance and provide some insight for the back-to-school season. Kerry will review the first quarter financial results, along with the second quarter guidance, and then we will open the call to take your questions.

Before I start with my prepared remarks, I would like to let you know that our hearts and prayers go out to those suffering from the loss of life and property from the recent Oklahoma City tornadoes. We are thankful that all our employees are accounted for and they all survived this disaster. Now onto the call.

It is important to note that the 53rd week in our fiscal 2012 caused a 1-week shift in our fiscal 2013 calendar, resulting in the end of our fiscal 2013 first quarter being shifted 1 week later to the 4th of May as compared to the 28th of April for the prior year. This shift will affect all quarters, and if there are seasonal influences near the respective quarter-end dates, our year-over-year sales comparisons may be impacted. Our reported quarterly and year-to-date comparable store sales results for fiscal 2013 and our public disclosures are being adjusted for this shift.

After a slow start to the first quarter, we are pleased to report that sales improved dramatically during the latter part of the quarter. This improvement in sales mitigated our comparable store sales loss for the quarter to 0.8%. This was better than our expectations for comparable store sales of down 2% to 4%, which we discussed with you at the beginning of April. This better-than-expected performance was driven primarily by low-single digit increase in athletic footwear as more seasonable winter weather patterns suppressed sales of opened up footwear. As a reminder, same-store sales were up high-single digits for the first quarter last year.

Traffic for the quarter was down high-single digits, and conversion was flat. Average transaction was up high-single digits, with average units per transaction up low-single digits compared to the prior year period. Merchandise margins were down 90 basis points primarily due to the lower margins on both dress and dressier sandal product as we got more aggressive to accelerate sales in these categories for Easter. Although our gross profit margin of 29.5% was lower than the first quarter last year and our selling, general and administrative expenses were higher on a dollar basis, these results were also better than we expected. As a result, we were able to report first quarter earnings of $0.47 per share, which exceeded the top end of our expectation.

In our e-commerce store, we continue to improve the site and consumer experience to ensure brand consistency across all touch points. While we don't disclose sales or profitability of any individual store, we are pleased with the progress we continue to make in becoming an omni-channel retailer. And finally, we ended the quarter with inventory up approximately 5.2% on a per-store basis. On-hand unit inventory ended the quarter up 3.2% on a per-store basis, with increases in children's shoes, which we believe will continue to outperform our plan, and certain categories of women's shoes that are producing strong sales. In a few moments, I'll provide more detail on this category's strength when I review the women's nonathletic product performance.

Moving on to merchandise. There is no question that the combination of the change in tax policy, along with the colder weather patterns of February and March, had a negative effect to the early sales of opened up footwear and athletic shoes. However, once we entered the second half of the quarter, our customers began to react favorably to our selection of athletic shoes for the family. In our women's nonathletic department, sales for the quarter were down mid-single digits on a comparable-store basis, as sales were impacted negatively by the lackluster performance of opened up footwear. We were pleased with the performance of our women's junior classification as campus and fabric shoes continued to produce robust sales results.

As I mentioned on our last call, we have identified about 20% of our stores where we will begin to test select better brands, which offer great trend-right product at price points we believe will be compelling to the mom already shopping in our stores. Shoe Carnival is already her favorite store when it comes to athletic shoes for her, as well as footwear for every occasion for the rest of her family. We expect to deliver this product early in the third quarter, and I will continue to keep you posted on the progress of this test.

In our men's nonathletic department, we ended the quarter with a low-single digit decrease on a comparable store basis. Once again, losses were driven primarily from the sandal categories. As you would expect, the cold wet weather helped in driving mid-single digit increase in the men's casual boot category.

Our children's business ended the quarter with a low-single digit comparable store sales increase. This increase was driven primarily from girls' and boys' athletic as our customers continued to react positively to color. The key categories in kids' athletic were infants' athletic and girls' and boys' running. In adult athletics, comparable store sales were up low-single digit for the quarter. The classification of product driving the gains in adult athletic for the first quarter were women's walking, men's and women's running and men's retro basketball. As we have previous mentioned, color is still the lead story in running shoes for both men and women. We continue to be excited about the performance of our athletic business as we were able to produce a comparable store sales increase on top of a record-breaking first quarter last year.

Although it is very early in the second quarter, we are pleased with our early results, with comparable store sales increases in the high-single digit range. As expected, when more seasonal -- seasonable spring weather patterns arrived, in addition to athletics, customers have begun to respond favorably to our spring and summer nonathletic product.

Turning now to store expansion. We ended the quarter of -- first quarter of 2013 with 364 stores operating in 32 states and Puerto Rico. The 13 new stores we opened in the first quarter were primarily in existing markets as we continue with our strategy of opening new large markets on a biannual basis. In addition to our new stores, we relocated 3 stores. The effort of our entire Shoe Carnival team from our corporate headquarters to the store level continues to be tremendous as we execute on our robust unit growth strategy.

For the second quarter of 2013, we'll continue our accelerated store growth with the opening of 10 new stores, and we plan to close 2 stores. For the year, we expect to open a total of 33 new stores, including an additional 3 stores in Puerto Rico. At this time, we plan to close 5 stores this year. However, the number of stores we actually close will depend upon further negotiation with our landlords. Therefore, we expect to end fiscal 2013 with approximately 379 stores. We believe our strong unleveraged financial position leaves us well positioned for additional square footage growth over the next several years.

Lastly, looking forward to back-to-school, we believe that we continue to be in the midst of a strong athletic shoe cycle. As you all are aware, back-to-school is consistently driven by athletic footwear. And as a destination shoe store for back-to-school, we are encouraged by the continuous strength in this category year-to-date. As I mentioned earlier, we have seen very positive results in our nonathletic department and fabric casuals, vulcanized canvas and the nautical categories, and we feel very strongly that these categories will only get better as we move into the the back-to-school time period. Our buyers have been laser-focused on these trends and are committed to have an adequate depth on our shelves to take advantage of these opportunities.

Now I'd like to turn the call over to Kerry Jackson for details on our financial results.

W. Kerry Jackson

Thank you, Cliff. I will discuss our first quarter financial results in more detail, followed by information on cash flows and then conclude with our outlook for the second quarter of fiscal 2013. Our net sales for the 13-week first quarter ended May 4, increased $9.7 million or 4.3% to $232.3 million as compared to $222.6 million for the 13-week first quarter of fiscal 2012 ended April 28. Comparable store sales for the 13-week period ended May 4, 2013, decreased 0.8% compared with the 13-week period ended May 5, 2012. Of our $9.7 million increase in net sales, an increase of $14.4 million from the 44 new stores opened since the beginning of fiscal 2012 was partially offset by a comparable store sales decline of $2.9 million and a $1.8 million loss of sales from the 7 stores closed since the beginning of fiscal 2012.

The gross profit margin for the quarter decreased 1.3% to 29.5%. Our merchandise margin decreased 0.9%, and the buying, distribution and occupancy costs increased as a percentage of sales by 0.4%. The decrease in our merchandise margin was primarily the result of comparatively slower sales of our high-margin open, dress and sandal footwear categories. The increase in buying, distribution and occupancy was primarily in our occupancy costs. Typically, we need a 2% to 3% comp increase to leverage our occupancy costs.

Selling, general and administrative expenses increased $2.8 million in the first quarter of fiscal 2013 to $53.4 million. The increase in SG&A was primarily due to a $2.9 million increase in expenses for new stores, net of expense reductions for stores that have closed since the beginning of fiscal 2012. Other significant changes in SG&A for the quarter were increases in compensation and advertising in comp stores and decreases in incentive compensation and health care expenses. As a percentage of sales, SG&A expenses increased 0.2% as we were unable to leverage the increase in expenses due to our comparable store sales decline.

Preopening costs included in SG&A were $717,000 or 0.3% as a percentage of sales in the first quarter of fiscal 2013 as compared to $1.2 million or 0.5% as a percentage of sales in the first quarter last year. We opened 13 stores in the first quarter of both fiscal years. The decrease in expense between the comparative periods was primarily attributable to a decrease in advertising as during the first quarter of fiscal 2012, 6 of our 13 new locations were in Dallas, Texas, which represented a new major market for us.

The effective income tax rate for the first quarter of fiscal 2013 was 37.4% as compared to 38.5% in Q1 last year. The decrease in the effective income tax rate between periods was primarily due to certain discrete quarterly decreases in income tax expense recorded during Q1 of fiscal 2013. Net earnings for the first quarter of fiscal 2013 were $9.5 million or $0.47 in earnings per diluted share as compared to net earnings of $11 million or $0.54 per diluted share for Q1 of fiscal 2012.

Now turning to our cash position information affecting cash flow. During the first quarter of fiscal 2013, we declared and paid a quarterly cash dividend of $0.06 per share to our shareholders. This continues our quarterly dividend program initiated during the second quarter of last year and represents a 20% increase over the quarterly dividend rate in 2012. No purchases were made during the first quarter of this year under our current share repurchase program. We currently have $20.3 million available under our authorized share repurchase program.

Depreciation expense was $4.1 million for the first quarter. We expended $6.9 million for the purchase of property and equipment, of which $6 million was incurred for new stores, remodeling and relocation. Lease incentives received from landlords was $734,000. We opened 13 new stores and relocated 3. No stores were closed during the quarter.

Capital expenditures for fiscal 2013, including actual expenditures during the first quarter, are expected to be between $31 million and $32 million. Approximately $13 million of our total capital expenditures are expected to be used for new stores, and an additional $13 million will be used for store relocations and remodels. Lease incentives are anticipated to be $8 million to $9 million for the year.

My final comments today will focus on sales and earnings expectation for the second quarter of fiscal 2013. We expect second quarter net sales to be in the range of $217 million to $220 million, with comparable store sales increase in the range of 3% to 5%. Earnings per diluted share in the second quarter of fiscal 2013 are expected to be in the range of $0.26 to $0.30. Included in the earnings estimate for the second quarter is the expectation at the high end of our guidance that gross profit margin will be up slightly and SG&A as a percentage of sales will decrease approximately 150 basis points.

In the second quarter of last year, sales were $182.2 million and diluted earnings per share were $0.14. The calendar shift due to last year being a 53-week year is significantly affecting our Q2 sales and earnings compared to the prior year Q2. 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 back-to-school sales into second quarter of this year and out of Q3. If the 2012 calendar was restated to reflect the 2013 ending dates, Q2 sales last year would increase by $17.6 million.

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

Question-and-Answer Session

Operator

[Operator Instructions] At this time, we'll take a question from Scott Krasik with BB&T Capital Markets.

Kelly L. Halsor - BB&T Capital Markets, Research Division

This is Kelly for Scott. I just want to talk about your outlook for the comps. And given that comps are running up in the high-single digits in May and you guys had mid-single digit comp for the quarter, can you just talk about the cadence of the comps on a monthly basis for Q2?

Clifton E. Sifford

Well, what I'd rather tell you, this is Cliff, is that as we get closer toward the end of July, the numbers get -- we start going into back-to-school, so we're a little more cautious on the back-to-school numbers. As positive as we are about what's going to happen in back-to-school with the current trend in athletic, we want to be cautious on those numbers for July. So with moving -- schools' dates moving around and the whole bit, so that's the reason for the caution.

Kelly L. Halsor - BB&T Capital Markets, Research Division

Okay. And then just around your margin assumptions that are built in. Given -- from what we've heard in -- from other retailers and our own channel checks that there seems to be still some sandal inventory built up in the channel. And just how confident are you in your margin assumptions? And what are you hearing from other people in the space about having to pull the trigger on promotions and just your assumptions around that? And how confident you are that you can make that -- the high end of your guidance on the margin assumptions?

Clifton E. Sifford

So far, we haven't -- we've seen some promotional activity on sandals, but we feel very confident on the margins for the second quarter, and especially where sandals are concerned because we have already planned the promotions into that margin. So I'm -- I feel confident that we're going -- and we're very pleased with where -- as soon as weather turned warm, what happened with our sandal business and the opened up footwear, it did turn on. Last year -- and not to elongate this answer, but last year, we felt like we moved sandal business out of the second quarter into the first quarter. Remember, last year was unseasonably warm. This year because the weather got more -- righted itself, it became -- it was colder than last year, which it probably should be for the first quarter, those sandal sales are going to move naturally back into the second quarter. So that's the way we're looking at it, and we planned our promotions accordingly.

Kelly L. Halsor - BB&T Capital Markets, Research Division

Okay. And I guess on that same note...

W. Kerry Jackson

[indiscernible]

Kelly L. Halsor - BB&T Capital Markets, Research Division

Yes, sure.

W. Kerry Jackson

Margins, we are going to -- built in to the high end of our guidance is our merchandising margins are going to be down a little in Q2, and we'll see some leverage against the higher sales on our BD&O, which will cause the overall gross profit margin to be up slightly. So we've taken a little bit of a cautious approach in our guidance to begin with because of the seasonal product. But in addition, the sales that we're pulling in that last week of August or July, which are the start of the back-to-school, that time frame is a promotional -- back-to-school is promotional and the margins, while good are not as good as some of the spring seasonal product, so we take that into account in our guidance.

Kelly L. Halsor - BB&T Capital Markets, Research Division

Okay, great. That's helpful. And then just on the same note, as you've seen the traffic pickup since the weather has turned, can you talk just about replenishment of sandals or -- and how you're viewing that in the quarter?

Clifton E. Sifford

We're taking the same exact stance we took last year. We bought -- we own the sandals, and we will not replenish them because the season as it changes into back-to-school and becomes more athletic, we want to transition out of back-to-school into more fall-relevant product, so we are not reordering sandals.

Kelly L. Halsor - BB&T Capital Markets, Research Division

Okay. I mean, is it sandals or is that all seasonal footwear?

Clifton E. Sifford

Well, that was specifically the sandals. There's -- canvas and fabric shoes that are selling very well. And that product, we feel we'll carry into September and early October. So that product, if available, will be reordered.

Operator

At this time, we'll take a question from Chris Svezia's line with Susquehanna Financial Group.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Just curious, traffic, what was it like in April? And is your traffic positive as you've gone into the second quarter?

Clifton E. Sifford

In April, traffic was down in April mainly because of the shift in Easter. But the traffic for the -- so far, this month is up. And that's up slightly, but it's up.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. Okay, that's good. And then, Kerry, for you, I'm just curious. I know you're not going to talk about third quarter but I'm just curious, given the calendar shift and the impact that's going to have to some degree in the third quarter, what level of comp would you need to leverage the business in the third quarter, assuming flattish product margin. Sort of curious, your thoughts about that.

W. Kerry Jackson

Well, we -- if we get a -- our 2% to 3% -- we typically talk about a 1% to 3%, 2% to 3% comp increase. We can -- that's generally a level that we can leverage our SG&A numbers. And I would see that being able to do that -- if we can pull out a comp in that 2% to 3% range, that would create BD&O to be more flattish, buying, distribution and occupancy, because of the occupancy costs themselves.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay, okay. And then on the inventory piece, I mean, you guys are pretty comfortable with where your inventories are at this point in time, whether the mix of the sandal business -- what's currently going on? Are you guys pretty comfortable at this point?

Clifton E. Sifford

We're -- Chris, I'm going to answer it this way. Since the middle of April, I've been very comfortable with our inventories.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Fair enough, okay. Fair enough. And I'm curious, Cliff, you mentioned -- I want to understand what this is. You mentioned fabric casual, nautical and something else is key, what you're seeing right now is...

Clifton E. Sifford

Vulcanized canvas, which is -- we don't like to talk about brands, so I'm going to have to think about how I'm going to answer this question. But it's a skate-type product, vulcanized skate product. Selling very well, along with -- I'm telling, just about anything, with fabric, because of the color, and it is selling very well.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. All right, that's good for now. And lastly, I'm just curious, how are you thinking about, or how Carl is thinking about, the boot business and your planning for that category for the fall. Just after everything we've gone through, just sort of your thoughts about how you're thinking about that business for fall.

Clifton E. Sifford

Well, Chris, we are -- we actually believe that because of some of the changing trends that we're seeing, that the boot business is definitely going to shift. It's going to be -- it's not going to be as much sport boots. It's going to be booties and lace-up boots. There's all kinds of trends happening in boots, and we are actually planning boots up slightly for the fall.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Does that hurt your ASPs at all? Or is it pretty neutral at this point?

Clifton E. Sifford

Actually, as promotional as boots were last year, I don't think it hurts ASPs at all this year.

Operator

And moving forward, we will hear the next question from Jill Caruthers with Johnson Rice.

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

A follow-up on the last question, just could you talk about overall your AURs? It seems as though you're seeing some nice gains, especially quarter to date when you said comps were up high-single digits, but your traffic was just up slightly. Are you seeing greater price increases in the certain categories, such as, broadly speaking, athletic? Or I guess where are you seeing the biggest gains there?

Clifton E. Sifford

Actually, in athletics, we're seeing nice -- we're seeing some AUR. Our AUR was actually down in our nonathletic department for the first quarter, and that was because we had to be get more promotional as we move through the quarter. AURs in athletic have actually been somewhat flattish and up just very slightly. So I'm -- we drove -- any business we're driving there, we're driving through pairs.

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

Okay, okay. And then, could you talk about back-to-school? Are you doing anything differently on the advertising front? Or are you taking in some new brands or something that you're excited about?

Clifton E. Sifford

Well, we would rather not talk about how we're going to market our back-to-school season, especially this early. I'll tell you that we're very confident in the marketing approach that we're going to take. And as far as new brands, I'd like to hold that off until the next quarter for competitive reasons.

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

Okay. But you're definitely seeing enough newness in the market to keep you up?

Clifton E. Sifford

We are. I tell you, I'm confident about back-to-school for 2 reasons: one, we are seeing newness, that's number one; and number two, the continuation. Last year, for the first quarter, our athletic business drove our first quarter business. And there was a lot of -- there were some people that questioned whether or not we could repeat with a comp increase in athletic going against those numbers, and we were able to do that. And we were able to do that without being promotional, and that gives me great confidence for back-to-school.

Operator

At this time, we'll take a question from Jeff Stein with Northcoast Research.

Jeffrey S. Stein - Northcoast Research

Cliff, I missed a few things you've said at the outset with respect to AUR, units per transaction and number of transactions. Could you repeat that for the first quarter?

Clifton E. Sifford

Yes, Jeff. Our units per transaction were up -- units per transaction in the-- when we talk about that, we talk strictly shoes. It was up low-single digit, and our average transaction was up high-single digit for the quarter.

Jeffrey S. Stein - Northcoast Research

And AUR?

Clifton E. Sifford

AUR was up, in total, low singles.

Jeffrey S. Stein - Northcoast Research

And this is all footwear?

Clifton E. Sifford

That's correct.

Jeffrey S. Stein - Northcoast Research

Okay. Question on the shift between quarters, so you're accelerating, let's call it, $18 million -- $18 million to $20 million of business into Q2 from Q3. Is there any shift that you see from -- between Q3 and Q4?

W. Kerry Jackson

Well, a little bit. What you're going to see is, if you restated Q4 -- or I mean, Q3 2012 to correspond to our 2013 calendar, what you're going to see is a decrease in overall sales of about $20 million. So we're picking up about $17 million, as I said on -- earlier in my speech. And then, in fourth quarter, you lose the entire week, that 53rd week falls out. So you will see Q3 sales affected by the shift. So we're shifting that 1 week of back-to-school from Q3 into Q2. It is going to have a positive effect for Q2 but obviously a negative effect for Q3.

Jeffrey S. Stein - Northcoast Research

And that would be what, around $20 million?

W. Kerry Jackson

Yes. If you restated the prior year to the current calendar.

Jeffrey S. Stein - Northcoast Research

Yes. Okay, okay. So can you talk a little bit, Cliff, about what brands are going into the 20% of the stores that are going to be getting the better product?

Clifton E. Sifford

Jeff, we're -- I'm not ready to disclose that. I promise you we're going to disclose that on the third quarter call. But for competitive reasons, I just don't want to put those brands out there yet. And the reason for me bringing -- can I say this, the reason for me bringing it up is that we had -- obviously, we had a management change here in October, November and we brought in a new GMM at that -- brought in a new strategy for our women's business. And we're extremely -- we're excited about some of the things that we are doing there to improve our women's nonathletic business. So that's the reason I bring it up. We think it's a positive. We believe that this is a good first step to getting our women's nonathletic business to a percentage of our total that we believe it deserves.

Jeffrey S. Stein - Northcoast Research

And this will be -- will any of this show up in Q2? Or is this third quarter/fourth quarter?

Clifton E. Sifford

Actually, it delivers -- some of it delivers in August, so it's not going to have any effect at all on Q2.

Jeffrey S. Stein - Northcoast Research

Okay. And Cliff, on the subject of Puerto Rico, I want to make sure I understand clearly. You said you're going to have 3 more stores. Did you mean 3 more than you had expected previously or there's going to be 3 in addition to what you finished last year with?

Clifton E. Sifford

There's going to be 3 in addition to what we finished last year. I apologize for not being clear on that. I was recapping the number of stores we expected to open the rest of the year, and 3 Puerto Rico stores are going to be added to last year's total.

Jeffrey S. Stein - Northcoast Research

Okay. In the warm weather markets where you opened new stores in the first quarter, how did those stores performed relative to plan?

Clifton E. Sifford

Jeff, I don't have that in front of me. I'll tell you that we were pleased with the grand openings of our stores that we had in the first quarter, but it's really too early to tell how they're going to perform. The grand openings were good. We planned those grand openings in March, and we actually -- even though our March business was not where we wanted it to be, the grand openings were very nice.

Jeffrey S. Stein - Northcoast Research

Can you talk about the comp performance in the Midwest in the first quarter versus, again, the warm weather markets, the South and the Southeast?

Clifton E. Sifford

Yes, I can tell you this because this is the way we grade our business. We grade it South, Central and North. And our southern stores were up low-single digits, and the other stores were down. In fact I can -- they were -- the southern stores were up low, and the North and Central stores were down low.

W. Kerry Jackson

Jeff, I'm going to clarify something I said earlier. Actually, the shift in Q -- the decline in Q3 sales, if you restate the prior year Q3, was actually $21 million, not $20 million as I said a moment ago. And if you looked at Q4, the decline in sales on a year-over-year basis would be $11.7 million, so that rounds out the full year for you.

Jeffrey S. Stein - Northcoast Research

Okay. So $11.7 million reflects the extra week last year?

W. Kerry Jackson

Yes, the net effect -- the primary piece of it is losing that extra week.

Jeffrey S. Stein - Northcoast Research

Got it. Got it, okay. And Cliff, I know you've mentioned that your sandal inventory since mid-April is in good shape. But just for the record, can you tell us what your comp inventory in sandals were at the end of April?

Clifton E. Sifford

I'll tell you that my -- if you take soccer sandals out of the equation, because that goes into back-to-school, our sandal inventory is actually down slightly on a per-door basis within sandals.

Operator

[Operator Instructions] At this time, we'll take a question from Steven Martin with Slater Capital Management.

Steven L. Martin - Slater Capital Management, L.L.C.

Kerry, preopening expense worked out to be about $55,000 for the store -- per store for the stores opened in Q1. Should that per-store cost hold for the rest of the year? Are there any markets that are -- you're opening some more in Puerto Rico. Was it more expensive or anything?

W. Kerry Jackson

We are going to see a decline in preopening costs for the year. Let me double check Q2. And the big piece is the -- we opened those 2 large markets, both Puerto Rico and Dallas, and they were heavy advertising. We will actually see Q2 preopening costs slightly up over the prior year, and we'll see Q3 slightly down probably.

Steven L. Martin - Slater Capital Management, L.L.C.

Okay. And now that it's new management, is it fair to ask the buyback question?

W. Kerry Jackson

You can ask.

Steven L. Martin - Slater Capital Management, L.L.C.

The stock was trading rather weak at points during the quarter, and it doesn't look like you guys bought any back. So is that related to the fact that you just paid a big dividend? Or was there something else?

W. Kerry Jackson

Well, we did not buy back. I mentioned that in our -- in my prepared remarks. Keep in mind that because this is a later -- it's Q4, we don't release the numbers. We didn't release them until April 1. We were -- the company was pretty much locked up most of the quarter in buying back shares, so there really wasn't a lot of opportunity time-wise, which was a little unusual. And it's normal for this quarter, but unusual for most quarters.

Steven L. Martin - Slater Capital Management, L.L.C.

Okay. But -- so there wasn't any other reason? You weren't -- you hadn't made a decision because of your big use of cash in the fourth quarter.

W. Kerry Jackson

No. We'll take it on an instance-by-instance basis. We're committed to utilizing our share repurchase program. What we're not going to commit to is that every quarter that we'll utilize it. But we do want -- we think long term, that's a pillar of our return of capital to our shareholders and an increase in ROI to shareholders. So we are committed to using it, but we'll use it at various degrees at various times.

Steven L. Martin - Slater Capital Management, L.L.C.

Okay. Cliff, a question related to back-to-school in the back half. Without getting into what brands you expect to be big, what do you -- when you look at the ASPs or AURs for the back half, what do you think?

Clifton E. Sifford

You're talking strictly -- was that question in relationship to athletic or is that...

Steven L. Martin - Slater Capital Management, L.L.C.

Well, you can answer by category, but it was really more in total.

Clifton E. Sifford

I probably won't answer by category, but I'll tell you that we expect the average price to be up in the low singles. I don't -- we're not seeing the kind of price increases that we saw a couple of years ago over the past couple of years, let me say it that way, and we expect to see prices increase just in the low-single digit range.

Steven L. Martin - Slater Capital Management, L.L.C.

And that includes the fact that you're going to bring in some more expensive product for some stores, but it's so small it doesn't ...

Clifton E. Sifford

That's a 75-store test, that's 20% of our total fleet. And I'll be honest with you, I don't know how much that's going to affect overall price points.

Operator

At this time, we'll take a question from Sam Poser with Sterne Agee.

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

A couple of questions. Number one, when you were -- you said earlier that you are nervous about inventory up until April. Since April, you're happy about your sandal inventories. You buy about 50% of your non-slide sandals as private label, and you can't really cancel those. Have you had to make maneuvers on the branded side of that? And how do you look at that, thinking about next year and so on, as far as how you buy that kind of seasonal product? Will you buy more branded goods to give yourself a little more flexibility?

Clifton E. Sifford

That's a bunch of questions in there, Sam. But let me say this, we adjust our own order as we can. I don't want to get into specifics how we do that, with who, whether it's private brand or a branded. But you understand the business. And we, as you know, Shoe Carnival, reacts pretty quickly to a trend -- any trend, whether it be up or down. And we did that, and I think that's reflected in the margin being down 90 basis points.

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

But I mean, you can't really cancel first-class goods, so the only thing you can cancel is the branded stuff. Have you had to cancel some product that you otherwise wouldn't have canceled due to the fact you had limited to no flexibility on first-class goods?

Clifton E. Sifford

I'm not really sure how to answer that question. If this product we think is going to sell, we don't cancel it. If it's -- if we had product that -- see, we buy product and then we back it up. So you bring it in, in February, maybe March or January, and then you back it up for March and April. If the first order didn't sell, then you have to react to that. But the one thing you want to do, and you know this as well as anyone, is that you want to keep fresh new product flowing in at all times. So if you bought something that was delivered in April, and it was fresh and new, then we delivered it.

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

We're talking about like backup stuff on existing product. Anyway, secondly, Kerry, the calendar shift, you commented, I believe, to Chris' question that you can lever occupancy on a low-single digit comp or 3% or 4% or whatever it was in the third quarter. But given that 20 -- about $20 million is moving out of that quarter into the second quarter, that -- I mean, you're going to need a much higher comp than that on the adjusted comp line to do that in Q3, as you would need much less in Q2, I would assume, just because of the way -- because you picked up that strong week and then you lose that strong week in Q2 than Q3.

W. Kerry Jackson

Well, I will stand by my initial comments that if we can pull out in Q2 -- in Q3 a 2% to 3% comp and the comp is on a comparable-week basis, we should be able to leverage our SG&A.

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

Comparable week, so like the week ending-- the quarter ending October 5 this year versus assuming -- November 2 this year versus the week ending November 3 last year, that would be the comparison? Or would be sort of the fiscal comp week?

W. Kerry Jackson

Correct -- no, no, it's the week-to-week comparison.

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

But if you lose $20 million out of that, how can you do that? [indiscernible]

W. Kerry Jackson

There's a lot of amortizing that follows that $20 million.

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

But on the occupancy. That's -- the advertising is in the SG&A, isn't it?

W. Kerry Jackson

Yes. But I wasn't -- I didn't say anything about BD&O.

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

I thought that's why, I think, you might have missed...

W. Kerry Jackson

We're going to be more flattish on BD&O.

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

Right. I mean, you're going to need a much higher comp to lever the BD&O.

W. Kerry Jackson

Correct.

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

Okay. And you don't need much of a comp in Q2 to lever the BD&O because of that shift.

W. Kerry Jackson

Exactly. That helps significantly.

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

And then, just since we don't like to talk about brands, Cliff, does -- I mean, you talked about your walking business, bright color walking business. I assume those are $55 slip-on shoes. And then somebody named Robert has something to do with some of those canvas shoes. And you haven't mentioned anything about molded footwear this time so I thought I'd ask. So could you...

Clifton E. Sifford

It's Cliff. We didn't mention molded footwear this time because it wasn't a dropper mainly because of the weather, much warmer. Anything that was open like that, Sam, did not sell as well in the first quarter as it did last year.

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

Understood. And then, lastly -- I mean, do you feel that your new GMM is an upgrade from the prior person that held the job?

Clifton E. Sifford

I refuse to answer that question.

Operator

And at this time, it appears we have no further questions in queue. I'll turn things back over to management for any additional or closing remarks.

Clifton E. Sifford

All right. In closing, we're looking forward to the back-to-school time period as we feel confident that we're well positioned to take full advantage of that sales period. We appreciate you joining us today, and we look forward to speaking to you about second quarter results in August. Thanks again.

Operator

And again, this does conclude today's conference call. Thank you, all, for your participation. You may now disconnect.

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