Stock Buy: Shoe Carnival, Inc.

Shoe Carnival, Inc. (SCVL: 17.97 +0.21 +1.18%) continues to trade near its 52-week high as discount retailers remain in favor with value-driven consumers. The company’s better than expected Q3 results from mid November helped propel shares along their current upward trajectory.

Company Description

Shoe Carnival, Inc.. with its subsidiaries, operates as a footwear retailer primarily in the midwest, south and southwest regions. The company operates 304 stores, was founded in 1978 and has a market cap of $231 million.

Third-Quarter Results

Shoe Carnival delivered Q3 results on Nov 11 that sent shares higher. Sales were up 12.6% from last year to $191.5 million. Earnings came in much better than expected at 59 cents, almost double the Zacks Consensus Estimate of 30 cents. The company has displayed some nice earnings momentum over the last three quarters, with an average surprise of 139%.

Shoe Carnival also gained on an expansion of gross margin, improving more than 2 points to 29.8%. Operating margin was up 1.5% on contained buying, distribution and occupancy costs.

CEO Optimistic

CEO Mark Lemond was upbeat about the company’s results, saying that, “Our 10.2 percent comparable store sales gain was significantly above our expectations for the quarter. Mr. Lemond also sounded an optimistic tone on the future, adding that, “We are encouraged by our third quarter momentum and entered the fourth quarter with inventories well positioned to capitalize on key fashion trends.”

Estimates Jump

The analysts were encouraged by the strong results and optimistic view, sending the current-year estimate up 43 cents to $1.12. The next-year estimate is pegged at $1.31, a solid 17% growth projection.

Valuation

With a P/E multiple of 16X, this stock still looks reasonably valued in spite of the recent string of gains.

The Chart

Shares of SCVL hit a new 52-week high in early January at $21.14 before pulling back a bit on general market weakness. Look for support from the trend line on a further pull back, take a look below.