Good afternoon, and welcome to Shoe Carnival's Fourth Quarter Fiscal 2018 Earnings Conference Call. Today's call is being recorded. It is also being broadcast via webcast. Any reproduction or rebroadcast of any portion of this call is expressly prohibited. Management's remarks 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 and today's earnings 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 discussed on today's conference call and are contained in today's press release. To reflect future events or developments, I will now turn the call over to Mr. Cliff Sifford, President and Chief Executive Officer, of Shoe Carnival for opening comments. Mr. Sifford, you may begin.

Thank you, and welcome to Shoe Carnival's fourth quarter and fiscal year-end 2018 earnings conference call. Joining me on the call today is Kerry Jackson, Senior Executive Vice President, Chief Operating and Financial Officer. On today's call, I'll provide a brief overview of annual operating highlights, and our fourth quarter sales results as well as an overview of our fiscal year 2019 guidance. Kerry will review the financial results in more detail, then we'll open up the call to take your questions. Shoe Carnival finished the year strong with a fourth quarter comparable store sales increase of 4.7%. For the fiscal year, comparable store sales increased 4.3%, and we achieved record net sales of $1,030,000,000, an increase of $10.5 million compared to fiscal 2017, which was ahead of our expectations. Our record sales were obtained from double-digit growth in digital sales and low single-digit increase in our brick-and-mortar stores. We also enjoyed increases in all major product categories in each geographic region throughout our chain. We reported record earnings of $2.45 per diluted share, a 64% increase over 2017's adjusted earnings of $1.49 a share, and we surpassed the high end of our guidance of $2.43. Our merchant team continues to do a great job of identifying new trends, categories and key items of the season. They then buy these items at a sufficient depth, so that we can take advantage of key shopping periods like back-to-school and holiday. We are also pleased with our inventory position at fiscal year-end, which was up 1.6% on a per-store basis. Inventory in our seasonal boot categories ended the year down double digits. In addition, we returned a record $50 million to our shareholders during the year through share repurchases and dividends. This represents a 47% increase versus last year. We ended the…

Thank you, Cliff. We've included in our earnings release today a GAAP to non-GAAP reconciliation table, illustrating and describing the adjustments that only affect the prior year fourth quarter and prior year full year earnings. Fiscal 2018 Q4 and fiscal year earnings have not been adjusted and are presented on a GAAP basis. Where appropriate, I will compare this year's earnings results first to the adjusted results from last year, and then follow up the prior year GAAP results. In addition, Q4 of last year, the full fiscal year of 2017, included an additional week of activity compared to Q4 and full fiscal year in 2018. Where it adds value to comparing this year's results with last year, I will identify the additional week of activity included in the prior year. We reported net sales of $234.7 million for the 13-week fourth quarter of fiscal 2018 compared to the net sales of $243.2 million for the 14-week fourth quarter of 2017. Comparable store sales for the 13-week period ended February 2, 2019, increased 4.7% compared to the 13-week period ended February 3, 2018. The change in our fourth quarter net sales included increase in sales of $9.6 million in comparable stores and $2.8 million in new stores, offset by decreases in sales from closed stores of $5.7 million, and a $15.2 million due to the net effect of 1 less week in the quarter. Our gross profit margin for the quarter increased 0.9% to 28.4% compared to adjusted gross profit margin of 27.5% in the fourth quarter last year. The merchandise margin increased 0.5%, while our buying, distribution and occupancy expenses decreased 0.4% as a percentage of sales. The increase in the merchandise margin was primarily driven by our nonathletic categories during the quarter. The decrease in our buying, distribution…

[Operator Instructions] We will now take our first question from Sam Poser of Susquehanna.

I can hear you guys. Real quick, I know you're not guiding to the quarter because of the shift of Easter, but there's a lot of talk about sort of the impact of the shifting tax refunds and everything. Did that -- how did that, to this point, net out for you? I mean, like as expected, did it net -- I mean, can you give us some color there because there are a lot of moving parts and we've heard a lot about that?

There are quite a bit moving parts, Sam, as you mentioned, affected the Easter move into April, it's a big shift. But I will tell you, what I am prepared to tell you is that we were disappointed in the sales for February. And they came in a little below our expectation. However, we are pleased with the -- so far, sales for March, they're running ahead of our plan.

Okay. And that's even with Easter being this Sunday -- this coming Sunday last year? So...

No, we planned for that, Sam. So that's built into the plan.

So let me ask you this in general, have you caught up to your plan when -- would you combine the 2 months thus far?

Like I said in my prepared remarks, we're not going to tell you where we are for the quarter. As -- I basically have a bit more information I should have, telling you that we were not pleased with our February results.

Sam, one thing we will say additionally, is that, we took into account February and our expectation for March and the rest of the quarter when we evaluated our previously stated guidance, and we chose to remain where we -- with our previous guidance after the dive in where we stood for the quarter.

All right. And then since the close of the quarter, I know it's going to come out in the K, but since the close of the quarter, have you used any of that $50 million? Or have you been...

No, as I stated in my remarks, we still have $50 million available. We have been in a closed period since the end of the fiscal year, since we had released earnings at that point in time. So we had not purchased any stock at that point.

Okay. And then Cliff, can you talk about how you're viewing, sort of, both in the short and long-term the impact of Payless going away?

Well, Sam, anytime, a competitor goes away is -- we have to look it from a human standpoint, for the employees, but from a business standpoint, I think it's positive for us and others inside the family channel. The low end of our -- the great part about Shoe Carnival is that we carry a broad range of product and a broad range of price points. So I think we -- I think there is a benefit to be had for Shoe Carnival with Payless going away.

And then 2 other things. Kerry, can you give -- or either one of you, can you give us the comps by month for the fourth quarter? And Cliff, could you talk about the athletic business? It was -- in the quarter, it sounded like it was -- it sort of eked out, but can you -- 2 of your larger brands have sort of been okay at best last year. Can you -- could you give us any color on any changes you may or may not be seeing there as well?

Sam, we saw November being up high singles, and we saw December and January, both up low singles.

And Sam, we -- as you know, we don't talk about brands. That's a policy we've had long-standing. I will say that our athletic business was positive for the quarter. I am pleased, very pleased with where we came out in the fourth quarter with athletic.

And then as far as like mix of athletics, because it's so important to you, just in the general sense, looking ahead to this year. How do you feel about that?

We're still positive about athletic. In fact, we plan our athletic business up low to -- well, low single digits. We consider low single digits, anything under 3.5%.

We will now take our next question from Greg Pendy of Sidoti.

Just wanted to dig into that goal, I think, you mentioned of 10 new stores in 2020. You mentioned as you gather data on the CRM. But could you also share with us a little bit on what you may be seeing on the real estate lease environment out there? And is that something you think will potentially get more favorable as some of the competitors go away? And just kind of how you're weighing opportunities from a cost perspective?

Greg, we're, certainly, hoping that the lease opportunities open up from a -- just a little better from a costing standpoint. But the fact is we're really early in the process of looking for sites for 2020. We've been at this now for about 3 or 4 months. And I can't really give any more guidance than that. I will tell you this that we are looking in our current footprint. We are really not looking to expand outside of the current footprint. There are markets that -- for competitive reasons, I won't name the markets but there are markets that we are in that we believe, we have opportunity to grow store base, and that's where we're concentrating our efforts.

That's helpful. And then can you just kind of give us a little bit of color on how -- what you're seeing in the Puerto Rico stores right now?

Puerto Rico is a territory, it's performing positively. However, today, there, I believe 5 stores opened, whereas a year ago there were only 2 or 3 stores opened from -- that we covered. There are 6 stores open today in Puerto Rico. A year ago, there were 3 or 4, can't remember exactly. But -- so the sales that we're experiencing in Puerto Rico are spread over more stores compared than a year ago so our comps are not positive there. And we find that happened sometimes after devastating hurricanes, like Puerto Rico had where the stores come back very strong for the year. And then as the stores have -- were able to open up immediately, come online then the sales spread out, if that makes sense.

We will now take our next question from Chris Svezia of Wedbush.

So I got a bunch of questions, sorry. So first...

I hope we have a bunch of answers.

The first is cadence comp Q1 last year. Just walk through, Kerry, February, March, April, what they were?

March and April is really hard to describe because Easter moves around so much, but -- so we had a soft February, a summer this year where it was cold. And we -- kind of like the tax checks were a little delayed. We were down just into mid-single digits in February. And then the combined March, April was up just in the mid-single digits, which gave us a slight comp increase of 1.3% for the quarter. It was backloaded significantly. When it warmed up, we saw our sales take off. And people start responding, we saw some really good sandal sales when that actually occurred.

Okay, got it. When you think about low single-digit comp, is that basically the assumption every quarter? Is that fair to say?

It is. They're built into our guidance, yes.

Okay, got it. And I know it's going to be a little bit hard to calculate this. But I would assume normally March is a bigger month than February. Is that fair to say?

Yes. Because March is a 5-week month. So typically, it is larger.

Okay, got it. Okay, good. I'm curious, Kerry, just on cadence or any color. So just for the year, in terms of your expectations, I mean it's basically driven largely by the buyback. Or maybe any color you can give as it pertains to the margin, gross margin, SG&A? How should we think about those percent of sales as it pertains to the -- wherever you want to be, the midpoint, the high end of your guidance? Just any color about that.

You're talking about a little color around our guidance for fiscal '19?

For the year, as it pertains to gross margin and SG&A. Yes.

Okay, so built into the high end of our expectations, we're looking at a flat gross profit margin. And built into that is both the idea that merchandise margin is relatively flat, and the buying, distribution, occupancy is relatively flat. Remember, in 2018, where in Q2 this year, we recorded $1 million benefit from 2 stores in Puerto Rico that didn't open. And that reduced our occupancy cost in Q2 of this year, and therefore, for the full year of '18, that we're not seeing a repeat of it in '19. That was not included in the adjusted numbers I discussed today. So that's a little bit of headwind for leveraging BD&O in '19. We expect to see some leverage on our SG&A line, particularly, related to a decrease in our incentive and equity comp because the great performance we had in '19, we had above normal expense in those areas. We expect those return back to more normalized expense and that will create some leverage.

Okay. And final 2 things. Do you anticipate earnings growth every quarter? I know there's a lot of, certainly, benefit in the first half of the year. Did the calendar shift -- just how should we think about that? I know Q2 is a pretty high hurdle, but any color you could give there?

We expect -- we do expect a low single-digit increase each quarter of the year. We've got tremendous plans for our back-to-school time period. And so even though -- last year, Chris, you'll remember, we had -- every conference call, we kept reminding everyone that we had -- the goal to get a 7% increase in August. And then we topped it with a 6.5% increase. So I believe that our concept is great when it comes to back-to-school comp period. So yes, we have planned ourselves up each individual quarter.

I was actually talking more specifically about earnings, Cliff, not so much sales. But just from an earnings perspective how we think about each quarter?

I will turn that over to my financial expert, Kerry.

Well, we really need to see how the rest of this quarter ends up. But aside from this quarter, we're looking for increases in our EPS in each of the additional quarters. Depending on the revamp and the continuation of the positive sales we're seeing in March, it could be closer to a flattish quarter in Q1.

Okay. So Q1 is the only one that could be sort of flattish. Outside of that, you've got growth every quarter?

Correct, that's right. That's what we're guiding to, that's the high end of our guidance.

[Operator Instructions] We will now take our next question from Steven Martin of Slater.

It's a shame you weren't able to buy back stock during this depressed period. Cliff, I know it frustrated you.

Well...

Kerry, your guidance -- go ahead.

No, you go ahead.

Kerry, your guidance is based on what share count?

For next year, we're looking at diluted shares outstanding for the full year just over 15 million shares.

So you're assuming basically no incremental buyback in that?

We factor in a certain amount. We don't typically factor in initially because we can't -- we don't know what the stock price is going to be throughout the year. But we do plan a certain amount of buyback of the total $50 million.

Got you. You commented on Payless earlier. But you've also had Sears closed or not closed but get out of the footwear and apparel business. You've had more JCPenney closings. You've had Shopko close. You had maybe the second half of Bon-Ton and now rumored Modell's. Can you talk about any impacts you've seen or you expect to see, positive or negative?

I'm not sure how -- I am not sure how to measure it unless we talk to you about stores on a location-by-location basis. But I can tell you that the 4.3% increase in -- for the quarter. And our sales were up mid-single digits for the quarter, and mid-single digits for the year. And some of that had to be the fact that there was less competition. So I don't want to get down to the specific area or geographic region where our competition is closing but we've always talked about the fact that the U.S. is over-retailed, and today it's less, so...

Okay. You said you were very anticipatory of back-to-school. Can you tell us what about the second half of the year and back-to-school has you enthused?

Well, back-to-school, as you know, is our strongest time period, and we plan for it all year. Back-to-school and holiday are very, very important to us. We spend the entire year. I'm very excited about the product we have seen. I don't want to give too much insight because just like we listen to our competitors' calls, our competitors listen to ours. So I'll just tell you that we are excited about what we have seen and the plans that we've put in place.

Okay. And some of your other -- besides Puerto Rico, you had some newer markets that were underperforming, that had gotten a little better. Can you talk about some of your other markets?

Specific -- I'm not sure, but...

So that'll be Philadelphia, Detroit, Houston?

Again, Steve, I don't really want to get down -- conference call talking about individual markets. It doesn't -- it really sends a signal to the people we compete with every day.

We will now take our next question from Chris Svezia of Wedbush.

I just have one follow-up here. Just on the CRM initiatives, just real quick. I know you said, Cliff, that you've got a couple of more months to go before you really roll it out, but clearly, you are seeing things in the data and mining to the data that you're already utilizing in terms of your marketing, probably your inventory purchases and things of that nature. Just maybe talk about when -- is this right before back-to-school, you really start to lever some of that benefit from the CRM initiative in totality or just sort of how do I think about that?

We believe -- Chris, I'm going to answer that in 2 ways. Our business really took off in August of last year when we relaunched our Shoe Perks program. Our customers were very excited about what they saw, they're excited about what we were doing and how we were messaging them and that took off and continued throughout the fall season. So that gave us great confidence that we were headed down the right path. So with CRM, we are getting improvements almost on a monthly basis. The entire program won't launch until -- won't be done until the second half of the year, sometime after back-to-school but prior to fourth quarter, that's our goal at this point. But we are seeing benefit from what we are learning and how the customers are reacting to the messaging that we are using in all the marketing initiatives that we've utilized under this program. So we expect to continue to see benefit from CRM, even though the entire program won't launch until the fourth quarter.

There are no further questions at this time. I would now like to hand the call back to Mr. Cliff Sifford for any additional or closing remarks.

Just want to say thank you for participating on our call today, and we look forward to speaking to you again in May. Thank you again.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.