Good afternoon, and welcome to Shoe Carnival's Fiscal Year 2015 First Quarter Earnings Conference Call. Today's call is being recorded and is also being broadcast via 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.

Forward-looking statements should be considered in conjunction with the discussion of risk factors included in the company's SEC filings today's -- 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. .

Thank you, and welcome to Shoe Carnival's First Quarter Fiscal 2015 Earnings Conference Call. Joining me on the call today 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 first quarter performance, along with a little color on the second quarter and full year guidance. Kerry will review the first quarter financial results, then we'll open the call to take your questions..

We are pleased with our record sales results for the first quarter and our 3% comparable store sales increase. This strong performance came in spite of the fact that we face certain strong headwinds as we began the quarter. All of which, we outlined on our last earnings call.

The momentum we gained in January with the earlier tax refund season did not continue into February. In addition, we experienced 400 close or partially closed store days in February and early March due to the harsh winter weather that affected the Midwest. And lastly, the delay of new spring product due to the West Coast port issues.

These headwinds produced a 5% comparable store sales loss in February. But once weather moderated and fresh spring product arrived in our stores, our customers responded and our comparable store sales rebounded..

The sales increase for the quarter was broad-based with all merchandise departments producing positive comps.

Store traffic for the first quarter was up slightly to the same time period last year, which is the second quarter in a row in which we have seen a reversal of the negative traffic trends most retailers have experienced over the past several years..

Average dollar transaction, unit sales and average unit retail all showed positive growth for the quarter on a comparable store basis..

We added almost 750,000 members to our loyalty program, Shoe Perks. Our Shoe Perks members' spend on average almost 30% per transaction more than nonmembers and accounted for approximately 49% of our first quarter sales..

Gross profit margin for the company remained flat at 29.5%, while SG&A as a percentage of sales improved to 22.8% from 23% in the first quarter last year..

EPS for the quarter increased 15.6% to $0.52 versus $0.45 for the same time period last year..

We ended the quarter with inventory down approximately 2.9% on a store -- per store basis, which was a line with our expectations..

We continue to be very pleased with the performance of our online sales. Over the next several months, we'll add an additional 100 stores to the 250 stores currently capable of fulfilling online orders everyday.

This week, we'll begin testing our shoes to new initiative, which is first the step to creating an endless aisle experience for our customers. This is one of our most important initiatives for 2015.

It will give our in-store customers access to the full breadth of our chain-wide assortment, which is far greater than the assortment available in any single store location.

We will continue to invest in our multichannel initiative to not only meet or beat our customers' expectations, but to capitalize on our increasing online traffic and optimize conversion rate..

Additionally, we'll make significant improvement to our mobile site, which has become a meaningful part of our overall online sales. Our customers expect a seamless shopping environment with both a broad selection and depth of sizes regardless of how they choose to shop. Our multichannel strategy is making that possible..

Turning now to real estate. Over the past year, we have done extensive analysis on our existing store base. We are utilizing new technology that help us identify new trade areas for growth as well as identifying current trade areas where we may have a low-volume store with limited opportunity for growth..

We have decided over the next several years, we'll take our noncontributing stores that have minimal opportunity to improve in either renegotiate lease terms, relocate or close the store. As part of this initiative, we closed 6 stores in the first quarter of 2015..

As of today, we have identified another 4 stores that would close before the end of the year. There are an additional 4 stores that could be closed by year end depending upon ongoing negotiation with landlord..

During the first quarter, we opened up 7 new stores and relocated 1 store, ending the quarter with 401 stores in 33 states and Puerto Rico. For the remainder of the year, we'll open an additional 11 to 12 stores, all in existing markets we currently serve.

Through these actions over the next few years, we should see improved operating margin and accelerated EPS growth..

Moving on to merchandise. As I said earlier on this call, the increase we reported for first quarter was broad-based, touching every major department. We are very pleased to see both units sold and average unit retails were up for the quarter. We believe this tells us our customers are pleased with our spring assortment..

The consistent performer across all departments was from canvas footwear. However, we are also excited to see that women's boots and sandals both performed very well. The women's nonathletic department led the way with a mid-single-digit comp increase..

Since Easter is a key time period for the first quarter, I would like to address it separately. Because Easter moves year-to-year between March and April, we believe the best way to talk about sales is by combining the 2 months as 1 period..

For the 2 months period of March and April, comparable store sales for the company increased 6.7% versus the same time period last year. Women's nonathletic and kids' athletic were up high single-digits on a comparable basis with every other major department posting mid-single-digit comps..

Now I'd like to add some insight to our full year guidance. We are pleased with the way our business trended for the first quarter and, in particular, the Easter season. Second quarter has started out with comparable store sales up significantly.

However, as we look towards the end of the quarter and the start of the back-to-school season, there have been some major changes in tax free dates. These date changes will shift approximately $7 million in sales out of the second quarter into third quarter..

Let me explain. Last year, in the market we serve, 13 states had tax free holidays that celebrated or began at the end of July. This year, 3 of those states will continue their holiday at the end of July. 2 states have either not announced or have canceled their tax free holiday, and 8 states will shift their tax free celebration to August.

With these shifts in tax free in mind, we believe second quarter comparable store sales will be flat to up low single digits..

As we look forward to the rest of the year, we'll continue to think conservatively but with the ability to react quickly to opportunities as we did in the second half of last year. This strategy allows us to continue to control our inventory and expenses, which should result in double-digit growth in earnings.

Therefore, we still expect full year net sales to be in the range of $977 million to $991 million with comparable store sales increase in the range of 1.5% to 3%..

Earnings per diluted share are expected to be in the range of $1.42 to $1.48. This represents an increase of 12% to 17% over fiscal 2014 earnings for diluted share of $1.27..

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

Thank you, Cliff. Net sales were $252.8 million for the first quarter of fiscal 2015 as compared to net sales of $235.8 million for the first quarter of fiscal 2014.

The $17 million increase in net sales was driven by an increase of $13.4 million from the 38 new stores opened since the beginning of fiscal 2014 and a $7.1 million increase in our comp stores. These increases were partially offset by a $3.5 million loss in sales from the 13 stores closed since the beginning of fiscal 2014..

Our gross profit margin for the quarter was 29.5% and remained flat from the prior year. The merchandise margin increased 10 basis points from Q1 last year, while buying distribution occupancy expenses increased 10 basis points as a percentage of sales..

Selling, general and administrative expenses increased $3.3 million in the first quarter of fiscal 2015 to $57.7 million. As a percentage of net sales, SG&A decreased 20 basis points..

The increase in SG&A was primarily due to a $3 million increase in expenses for new stores, net of expense reductions for stores that are closed since the beginning of fiscal 2014.

Another increase in SG&A for the quarter was attributable to incentive and equity-based compensation expense, which increased $826,000 in the first quarter of fiscal 2015 compared to the same period last year..

Preopening costs included in both cost of sales and SG&A decreased $67,000 in the first quarter of fiscal $2015 to $717,000..

Store closing impairment charges included in both cost of sales and SG&A Q1 this year were $169,000 compared to $63,000 in Q1 last year. The effective income tax rate for the first quarter of fiscal 2015 was 38.8% as compared to 39.7% for the same period in fiscal 2014..

For fiscal 2015, we continue to expect our tax rate to be between 38.5% and 39%..

Net earnings for the first quarter of fiscal 2015 were $10.4 million or $0.52 per diluted share. For the first quarter of fiscal 2014, we reported net earnings of $9.2 million or $0.45 per diluted share..

Included in the earnings with Q1 this year is approximately $0.01 of additional distribution cost due to the West Coast port congestion..

Now turning to our cash position and information affecting cash flow. No purchases have been made this fiscal year under our share repurchase program. We currently have 25 million available under our existing repurchase authorization. Depreciation expense was $5.6 million in Q1.

The depreciation expenses are projected to be approximately $23 million for the full fiscal year..

Capital expenditures for fiscal 2015, including actual expenditures during the first quarter, are expected to be between $24 million and $25 million. Approximately $8 million of the total capital expenditures are expected to be used for new stores and $7 million we use for store relocations and remodels..

Lease incentives are anticipated to be $5 million to $6 million for the year..

My final comment today will focus on adding a little color on our earnings expectations for the second quarter this year. As Cliff said earlier, we expect our Q2 comp store sales to be flat to up low singles.

Additionally, we expect our gross profit margin to increase nicely due to the improvement in our merchandise margins, and SG&A should leverage a little..

For the past 2 years in Q2, our merchandise margins have declined due to tepid response by customers to our spring merchandise and higher levels of clearance product. With better-positioned inventories this year, we expect to recapture a significant part of that 2-year decline in our merchandise margins..

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

[Operator Instructions] And we'll take our first question from Jeff Stein with Northcoast Research. .

First, a quick one for Kerry. You mentioned that you think you can capture a significant portion of margin you gave back last year, so you dropped roughly 90 basis points last year.

Do you think you can get more than half of that back, or how should we be thinking about the gross margin line?.

Well, that 90 basis points is correct, but that was over a 2-year period. For the past 2 years, that has been the mark, the decline. I'd rather stay qualitative and not quantitative on -- since we're only focused on giving annual guidance. So we should be able to capture a significant piece of that. .

Got it. Okay. And I'm wondering, given the fact that your loyalty program has been growing so dramatically. Are you using at all now for targeted personalization offerings to customers? That seems to be kind of the trend in the industry right now. .

Jeff, we are -- we're using it for marketing purposes. But we are not yet to the personalization standpoint. We will be there. We're working hard to get there, and we believe we'll be there very shortly. But trust me, we market to our loyalty members often. We're just not there from a personalization standpoint. .

Is that an initiative, Cliff, that we could expect this year, or is that probably 2016?.

We're doing everything we can to make it this year, Jeff. And we'd like to be there by fourth quarter. But I just -- I'm not prepared to say that's going to happen. .

Okay.

And with respect to e-commerce, just kind of curious, what percentage of returns are coming back to the stores?.

Oh, that's a great question. Coming back to the stores, we're not tracking that. We are tracking how -- what percentage are coming back to our DC, and that is remarkably low, at the -- it's a -- in a very low double-digit range.

The reason we don't track the returns to the stores is our goal is when they return to stores, we'd sell them something else, and we're pretty successful with that. .

Yes, that's my point. I mean, it's a traffic driver, so... .

Exactly. We actually charge to return to the DC. We charge shipping to return to the DC, so it encourages our customers to bring the product back to the stores. .

Got it. Okay.

And just with respect to average unit retails kind of for the balance of the season, do you see them continuing to move up relative to last year?.

I do, and that's not because of -- necessarily because of cost increases. That's because of the fact that any cost that's going up is because we're bringing better product into the stores.

So we expect to see average retail move up as we expand our better selection of women's product into more stores and as we -- as that product takes a larger percentage of the inventory. .

Okay. And if I recall, Cliff, you were roughly 140 stores with the better women's product at fiscal year end, and the plan was to get up to about a 175 this year.

Are -- Where are you at the moment?.

We will hit the 175 for fall. At the moment, we're still at the 140. We feel that -- we have learned that the best time to add that better product for us and for our customer is in the second half of the year. .

Okay. And one final question. Can you talk about your plans for ad spending this year as a percent of sales? It was up about 20 basis points last year.

Where do you see it trending, if you hit your sales targets for this year?.

Totally flat to slightly down, Jeff. .

Yes. That's exactly the answer I was going to give you, but he was looking at the report. So I wanted to make sure. It's flat to slightly down. .

Take the next question from Eddie Plank with Jefferies. .

I wonder, can you just remind us what your comp cadence was in the second quarter last year? Obviously, it was down a couple of percentage points, but it was the worst month in June, July. I'm just trying to get a sense of the tailwind you might get into the third quarter due to this tax free shift. .

The -- Kerry is looking it up by month, but we -- May was tough, and June was tough. July got better. July was actually, if I remember correctly, slight -- very slightly positive. .

Slightly positive. And May and June were negative about the same amount. .

Yes. .

Got it.

I guess, I'm just wondering then, does that imply any change to the thoughts on the full year merchandise margin, gross margin or SG&A that you'd kind of outlined in the first -- for the first quarter -- end of the quarter last month -- last March?.

No. This was in line with our original expectations for the year. What we would intend to do is continue to focus on quantitative numbers on an annual basis.

But as we approach each quarter, we will give a little qualitative information on, so you can better build your models and anticipate and firm up the coming quarter to -- for your guidance, that's why we're giving that. But that was in line with what we have thought about at the beginning of the year. .

Okay. That's helpful. And then one last one.

With respect to the real estate strategy and the analytics you're using, is there anything you can share there about the productivity or help of the locations that you've opened since you've been using this technology?.

It's been a learning experience. We brought the software in, and we had our first model just over a little year ago. So we're really too early in the process to declare a victory and move forward.

Having said that, we are pleased with the stores that we've been opening this past year, and we feel like there -- what -- with the small amount of information we have available that we are seeing a higher level of excess -- success. Having said that, it is all attributable to the software, though. Part of it is a -- is our evaluation process.

We have a committee that looks at the real estate. We changed a lot of how we select real estate in addition to using software to help us see things that's in the data that we may not see with our naked eye. So I think there's a series of changes that we feel are going to make our new stores more productive. .

Take our next question is from Sam Poser with Sterne Agee. .

All right. What does up significantly mean? You said you were up mid -- down mid single-digits in -- quarter-to-date last year at this time. .

We are, we're up significantly. Here is the issue, Sam, as you build your model and -- we're up better than we were down this time last year. So in the 2-year average, we're better -- business is better than it was over a 2-year average.

So the issue is that as you build you model as aggressive as you are, you'll build our comps at a higher rate for second quarter, and we're going to hit. You got to remember that $7 million shift at the second quarter and the third... .

Even with my bad math, I can pull $7 million off [indiscernible] number to get to the lower. .

That's the reason we spelled it out for you. .

But -- all right. And then -- I mean -- and then just back to the gross margins for a second. In my model, your margins were -- your gross total was down 87 bps last year. In the second quarter, it was actually up slightly in the Q. You had some leverage in Q -- and a fixed cost leverage in Q2 2013.

But your merch margins were up or down over the last 2 years. I mean, are we looking -- I mean, you start telling us parts of it here. And then we have to build it ourselves.

I mean, are we looking at gross margins up 50, 60, 70, 20, 30? I mean, what -- I mean, we don't need -- why be coy about this? You know what you want to tell us, just tell us what you're thinking. .

Well, Sam, I think we did. What we said is, over a 2-year period, our merchandise margins had decreased in second quarter 90 basis points. .

Correct. .

And we think we can recapture a significant portion of that. We also said in my remarks that if all the gains in the gross profit line is going to come from the merchandise margin, so we're saying that, being -- or buying distribution oxy[indiscernible] costs are going to be relatively flat on a year-over-year basis.

I think we've given you quite a bit to build your model with. .

All right. And then, you sort of flew through some of the -- you didn't go through the normal details on the categories that you did -- I mean, and I couldn't tell you if you were talking about Easter time period when you mentioned some of the categories.

Can we walk through women's, men's and athletic and kids as to where it was for Q2?.

Well, what I think I -- for Q2 or Q1?.

For Q1. I'm sorry, for Q1. .

Yes. Well, I think I said was that every department, every major department was up. And that women's nonathletic was -- led the way. And that -- and I'll tell you that men's was up low single digit; kids was up -- kids and athletic were up low; and women's was up mid. .

And with your boots and sandal businesses, that was, I guess, a late fall, and then when spring kicked -- when spring finally kicked in it did quite well. I mean, based on that combined 6.7% comp for April and May together. .

It's going to be hard to believe, but our boot business was actually good for Easter. I explained that. But our sandal business did kick in as soon as it turned warm and -- especially in the north and was good throughout the first quarter, once we got past February. .

And in the South, did you see -- I mean, did spring kick in well in your Southern -- in more Southern stores earlier? I mean, did -- were you happy with that business or was that still soft?.

In actuality, our comps in the -- for spring product was better in the North for the first quarter than it was in the South. And the reason for that is, is that it was really cold in the first quarter for last year, and it was warmer this year once the snow has moved out of the Midwest.

And so we were going to get easier [ph] comparisons in the North than we were in the South. Bargain was greater in the South, but the comp increases were greater in the North. .

And have you seen -- I mean, when you're looking at this significant increase that you have so far, have you seen it follow that same path? Or is it more balanced out now that we're really in season?.

Once that you -- once get to consistent warm weather across all categories for both years, across all geographic regions for both years, it balances out. .

We'll go next to Scott Krasik with Buckingham. .

So just going back. I guess I was confused when you spoke last quarter. I'm just trying to parse out what happened on the call because I wasn't expecting February to be down 5% based on your comments. So -- I mean, if you could go back, were you positive when you reported last quarter? And I just reread the transcript. .

I would have to read my transcript again. But I think I actually said that February was down 5%. And that we were negative. We we're actually negative at the time of the call. But I felt like that the recent change in our business due to the warmer weather that we would end the quarter with low to -- with flat to low single-digit comps.

I believe that's what I said. Kerry is looking at that right now. .

Yes. It was a little bit confusing. But then -- so then you gave us marble. Can you just -- just to make it a little easy, I mean, was April negative or was... .

Well, March -- you got to remember now that Easter moved to the first week of April. So most of the Easter's business happened in the month of March. So all -- in fact, all of Easter's business happened in the first -- in the month of March. So our business in March was up in the 30s. But that's because all the business happened during that month.

And then April was negative. But that's because Easter moved out of April. That's the reason we say that the best way to look at this thing is to look at March and April as a combined total, and that was up 6.7%. .

That makes sense. And then just a question, you obviously have opportunity with your margin in the second quarter. But I'm curious because you said, number one, it was because you had your spring seasonal inventory planned better or more in line.

So I'm wondering, do you feel good that you can actually comp well with your spring seasonal goods? Or is it just like you bought less of it, so the potential for markdowns is less?.

I think there's 2 things, and you picked up on one of them. We obviously bought less because we're own at inventory churn initiative over the next 3 to 4 years. So the inventories are not as -- are going to be -- continue to be lower. The -- but I'm going to also tell you that I'm really pleased with the way that the current product mix looks.

And the way that we bought into key items, other season heavily. And how we've identified -- I believe we've identified the strongest sandal categories to go after. So that business is good, and it's turning well. Our sell-throughs are strong. So I'm -- that's the reason we continue to believe that our margins are going to be up. .

And -- okay. So it really is sort of true sandal... .

This is a combination of -- I guess it's a combination of both of the things that you said. .

Okay, okay.

And then in terms of athletic, I mean, any commentary there and -- because you pull a lot of your canvas, it's not actually in athletic at all, right?.

Yes. We've -- you -- it's hard for you to address -- look at our athletic and compare it to anyone else's athletic because we move a lot. If it can't be used in a sport, then it reports to the nonathletic department. So that's a little different than our competitors. But our athletic business is good. Our true athletic business is good.

Our running business is good. Our basketball business and men's and women's is good. So I'm very happy with our athletic. In fact, our athletic business is running on plan. .

And then you obviously don't have to go through it in detail.

But any changes in your promotional plans for back-to-school year-over-year, shifts earlier or later?.

Other than major shifts in -- we do 2 things, Scott. We look at the tax free because that's a very huge driver of large volume leaks. So we look at tax free, and we make the shifts based on when the states are going to run their tax free. Then we look at every single market areas, back-to-school days, and we make our shifts there as well.

So the natural -- and you look at Labor Day, and when Labor Day is to see if there is any major shift there. So back-to-school is always a shifting time period year-after-year. It just happens to be a major shift this year because of tax free. .

Okay. And then just to the extent that you did buy summer or spring seasonal down.

Is there an opportunity to chase later in the season? If -- is that was something you want to do, or you want to just keep the inventory trends up?.

The -- some of the biggest mistakes we've ever made as a company is when we decided that we would chase spring goods and -- later in the quarter because those spring goods usually end up on the markdown rack in August. So we're pretty excited about where we are.

We think that we have plenty of inventory to get us through the spring season and then to back-to-school. And then once we get to back-to-school, we want to be selling fresh merchandise. .

We'll take our next question from Jill Nelson with Johnson Rice. .

If you could give us an update kind of just on the delays that we saw throughout the quarter, port issues and what have you.

If you could just kind of update us on shipments, or all they on track now? Or are we still looking for a maybe a month of settling out disruptions or what have you?.

I think, there is still some slight delays. It's definitely gotten better. And as our quarter moved on, it got better and better. We've taken all the shoes that we deliver directly from the far east. We've taken them and moved them to the East Coast ports. So that naturally slows things down by about 6 or 7 days.

But that was a lot better for us than the 3 to 4 weeks delay that we were experiencing out of the West Coast. So we've mitigated our issue by going to the East Coast. That's number one. Number two, some of the brands are still having issues. And -- but the issues aren't huge, maybe a week or 10 days.

And we think that, and the brands assure us, that, that's going to mitigate by the time we get to June. So I think it's almost over. .

Okay. And then just given the women's nonathletic initiative, kind of you've had a good solid group of stores in this program for kind of the second year now. If you could just talk about how they're comping on top of each other in year 2.

And are you still kind of seeing a 200 basis point higher comp out of those stores?.

In actuality, I don't have that number in front of me, so I don't -- I had to take to give that to you directly. I will tell you that they are comping better than our stores without the better brands. So I will tell you that.

And I'm very encouraged by the fact that our women's nonathletic department for the second quarter in a row led the company comp store increases. So it is working. .

Okay. And then just last one, given the drop in oil prices and what we're hearing about Texas economy.

Could you just talk about kind of how Texas performed for you in the first quarter, and if you think you felt any impact from that?.

In actuality, we've been following Texas this -- we hear buzz about the fact that Texas businesses to get tough. But our business in Texas as a whole has not been widely affected. I'm not going to tell you there's not pockets of Texas that haven't -- that -- but Texas as a whole has been good for us. .

[Operator Instructions] We'll go next to Chris Svezia with Susquehanna Financial Group. .

So I just want to go back to Scott's earlier first question. Just -- could you just maybe, I don't know if Kerry, if you're able to dig it up, but I vaguely remember, Cliff, you're commenting that comps were strong and -- initially in the first quarter then weaken, I think, mid-February into early March.

And then I think as -- when you reported the numbers, I think you commented that business suddenly started to accelerate, I think, that week or something on those lines. So were you, at that point... .

That's exactly, right. The first week of February was incredibly strong, just like the last week of January was. And as we move, the second week of February was good, but not like the first. The third week of February and the fourth week of February, first week of March -- really don't like getting down week-to-week business.

But since I mentioned it in the first quarter call, I guess, I have to, be on we're not just bad but they were awful. That was the 3 weeks where we lost 400 store close days. And we actually ended up February down 5%. And I believe Kerry is looking at that transcript now.

I believe -- I believe I said, either in the question-and-answer or in the script that we were actually negative going into that call, but -- or slightly negative I might have said either or close to flat.

We felt that with the current trend at the time of our call that things were going to be better and we were going to end the quarter flat to up low. .

Okay. So at the time of the call, you were down, fair to say, low single digits in aggregates of quarter-to-date.

Is there a fair assumption?.

Well, just slight -- I think that we were slightly down. .

It was closer to breakeven than anything else, but it was slightly down. .

Okay. At that time. Okay. Okay. Then what -- I'm curious, what -- when you talk about traffic, I'm just curious, what do you -- I'm sure it's your compelling product assortment.

But I'm just curious what do you think is driving it? Is it what you're doing on your Perks? Is it the advertising? What's driving the traffic to your stores, specifically?.

I think that's a combination -- I personally believe that's a combination of our advertising, of our Shoe Perks, which is not just national, okay? It's what we do digitally. It's what we do to our Shoe Perks members. And the fact that, over the 2.5 years, we have added almost 6 million, and I think I'm right on that.

6 million new members, which gives us 6 million new email addresses to market to. So you got to take that in consideration. And then our online presence. Our online presence has helped our business. In fact, once we were -- once we went to ship from store last year and our business escalator at the rate it did, people got to know who we were.

And they bought product from us, and they had good service and good experience. And they came in our stores afterwards. So I believe it's a combination of all of that. .

Okay. When you think about -- so I just want to focus a second on this tax free holiday. When you think about the $7 million shift that in Q2 and in Q3, call it, 100 to 200 basis points roughly on the comp, just assume all else being equal, Q3 clearly benefits from that.

All else being equal, correct?.

No question about it. .

Okay. So then, not to dig too deep into the weeds here, but Q3, while -- it seems like Q2 is going to have the merchandise margin benefit just given the 2-year trend.

Q3 maybe not as much, but it seems like the inventory trend line, the growth in the women's business could still drive product margin improvement, coupled with potentially better leverage because you can get a much stronger comp because of that shift and the timing of that shift. That's fair? I'm not asking specific numbers, but I'm just... .

You -- definitely could. August should be -- August should get the benefit of that shift. The fewer member at our last year's comps, I think we've talked about this on the call, is that, we had our August numbers were slightly up. Our September and October numbers were very strong.

But the reason our September and October numbers are very strong is because weather cooperated 100%. I had a coolish September and coolish October. And our -- we got -- we launched our boot product very successfully.

So we -- you tell me how -- if I could figure out exactly what the weather patterns are going to be like in September and October, I can give you a better answer. .

Okay. What -- just on product for a second. The boot business, what did you say again in the first quarter? A comp positive with you said, through Easter or up to Easter? I forgot what you said. You said something... .

The comp positive for the quarter. It was -- the comp -- it was up in the 30s. .

So when you step back and you think about what you're going to do for the back half of this year, what are your just general thoughts about your learnings that you're -- just how you're positioning in that category given the success you had last season?.

I would've been disappointed to have somebody not ask that question. I'm glad you did. We still feel that we have opportunity in boots. As strong as our boot business was in the second half of the year, last year, we believe that we left a little on the table, and we're planning our boots up in the high single-digit range for second half. .

Okay. And -- okay. And last point here, just on the marketing aspect. I know you didn't really start seeing the benefits in the national advertising because you weren't tying in with a specific product catalyst or a reason to shop, I guess.

What -- can you just remind us last year when that really kicked in? And I know you're not going to tip your hat as to what you're doing for back-to-school, but I assume you got to your ducks all lined out for back-to-school in terms of being able to drive that traffic.

So any thoughts about how you're thinking about national advertising and the timing versus last year when that really kicked in?.

We actually believe we began to kick in, in September, but we know we can actually track it for kicking in October. .

Okay. So for -- I guess, I'm trying to get a -- for back-to-school this time around, you will be much more constructive and productive around, yet the national advertising piece versus last year? I'm just trying to think about what else could drive -- I'm just trying to think about traffic drivers. That's all. .

Right. We're -- we believe we have a strong marketing plan for back-to-school. I just really don't want to go any further in that. .

Okay. All right. One more thing just on canvas. Everyone in our team is talking about canvas. So I'm just curious your comfort level with sustainability in that category as we kind of continue to move forward there. .

Chris, it gets stronger and stronger every month. So we haven't seen any slowdown at all. Sustainability, that's going through this year. .

We'll go next to Sam Poser with Sterne Agee. .

A quick follow-up to Chris' question.

I mean, are you -- have you -- are we finding that the -- are you finding that probably, the sandal business theoretically could go through the beginning of September? You could flow in boot -- that in boots run through -- boots generally can run through February and March, which means these seasons are all getting a little bit longer and overlap differently.

And that's going to -- are you going to -- how do you go about planning your business -- if I'm correct about that, how do you go about planning your business not to get caught, I guess? I mean, am I thinking about it right? Because it sounds like it... .

You're differently thinking about it correctly. The sandal business does expand into at least through the back-to-school season. And the boot business, I think -- I'm telling you a lot of my comps were up the first quarter, expanded into the first quarter of this year.

So I personally believe that we'll continue to show comp increases in boots through the rest of this year. And as far as not getting caught it's all based on the inventory control, and you got to be a pretty good student of the business, and say, "Okay, this is the number. Apparently, we can sell them." So this is all we're going to buy.

And that's -- basically, that's just retail 101 as you know. .

No, no, I understand. But I guess, my point is, though, that -- the point is that can you make the -- can you extend the seasons and just say, "Okay, we need to take our markdowns in boots in January.

Now we're going to take -- we're going to mark down some, but we're going to keep our fresh thing rolling." And just to plan on extending the seasons of both boots -- of the more seasonal product because it seems like everything seems to be stretching out a little bit. I don't know if that's all done by managing inventory, but... .

But Sam -- but we -- we have been doing that, and we will continue to do that. The customer buy is closer and closer to need. When it's 100 degrees when they go back-to-school, they're probably going to be looking for canvas and sandals. So we don't -- there's no reason to take the markdown for that time period. .

And if I can ask you a brand-specific question.

I mean, where does Skechers fit into where you -- is it living in -- women's Skechers, is that mostly living in women's nonathletic?.

It lives across all departments. Every department. Just think -- well, let me say it this way.

Did you say women's Skechers or Skechers in total?.

Women's Skechers in total. .

Women's Skechers resides both in the women's nonathletic department and in the women's athletic department. .

But the majority of it's in the women's nonathletic, I would believe, based on the way you mix product because not much of it is absolute performance product. .

I would believe you're not correct. .

So you put walking in athletic or not in athletic?.

No. If it can be used as a sport -- in a sport, it's an athletic. And if it can't be used as a sport, it resides in women's. .

That concludes today's question-and-answer session. At this time, I'll turn the conference back to Mr. Cliff Sifford for any final or additional remarks. .

Okay. In closing, I want to thank our entire Shoe Carnival team who worked hard to deliver great product and excellent customer service, which led to our record first quarter sales..

And I want to thank you for joining us today, and we look forward to speaking to you about our second quarter results on our next call in August. .

This does conclude today's conference. Thank you for your participation..