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SHOE CARNIVAL : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (type 10-Q)

Elements That Could Have an effect on Future Outcomes

This Quarterly Report on Kind 10-Q accommodates forward-looking statements, inside
the that means of the Non-public Securities Litigation Reform Act of 1995, that
contain quite a few dangers and uncertainties. Quite a lot of elements might trigger our
precise outcomes, efficiency, achievements or trade outcomes to be materially
completely different from any future outcomes, efficiency or achievements expressed or
implied by these forward-looking statements. These elements embody, however should not
restricted to: the length and unfold of the COVID-19 outbreak, mitigating efforts
deployed by authorities businesses and the general public at giant, and the general influence
from such outbreak on the operations of our shops, financial circumstances,
monetary market volatility, shopper spending and our provide chain and
distribution processes; common financial circumstances within the areas of the
continental United States during which our shops are situated and the influence of the
ongoing financial disaster in Puerto Rico on gross sales at, and money flows of, our
shops situated in Puerto Rico; the consequences and length of financial downturns
and unemployment charges; adjustments within the general retail setting and extra
particularly within the attire and footwear retail sectors; our capability to generate
elevated gross sales at our shops; our capability to efficiently navigate the
growing use of on-line retailers for vogue purchases and the influence on
visitors and transactions in our bodily shops; the success of the open-air
buying facilities the place our shops are situated and its influence on our capability to
appeal to clients to our shops; our capability to draw clients to our
e-commerce web site and to efficiently develop our e-commerce gross sales; the potential
influence of nationwide and worldwide safety issues on the retail
setting; adjustments in {our relationships} with key suppliers; our capability to
management prices and meet our labor wants in a rising wage setting; adjustments in
the political and financial environments in, the standing of commerce relations with,
and the influence of adjustments in commerce insurance policies and tariffs impacting, China and
different nations that are the main producers of footwear; the influence of
competitors and pricing; our capability to efficiently handle and execute our
advertising and marketing initiatives and keep optimistic model notion and recognition;
our capability to efficiently handle our present actual property portfolio and leasing
obligations; adjustments in climate, together with patterns impacted by local weather change;
adjustments in shopper shopping for tendencies and our capability to establish and reply to
rising vogue tendencies; the influence of disruptions in our distribution or
info expertise operations; the effectiveness of our stock
administration; the influence of pure disasters, different public well being crises,
political crises, civil unrest, and different catastrophic occasions on our shops and
our suppliers, in addition to on shopper confidence and buying usually;
dangers related to the seasonality of the retail trade; the influence of
unauthorized disclosure or misuse of non-public and confidential details about
our clients, distributors and workers, together with on account of a cyber-security
breach; our capability to handle our third-party vendor relationships; our capability
to efficiently execute our enterprise technique, together with the provision of
fascinating retailer areas at acceptable lease phrases, our capability to open new
shops in a well timed and worthwhile method, together with our entry into main new
markets, and the provision of adequate funds to implement our enterprise
plans; increased than anticipated prices related to the closing of
underperforming shops; the shortcoming of producers to ship merchandise in a
well timed method; the influence of regulatory adjustments in america and the
nations the place our producers are situated; the decision of litigation or
regulatory proceedings during which we're or could turn into concerned; continued
volatility and disruption within the capital and credit score markets; and future inventory
repurchases underneath our inventory repurchase program and future dividend funds. For
a extra detailed dialogue of threat elements impacting us, see the "Threat Elements"
part of our Annual Report on Kind 10-Okay for the fiscal 12 months ended February 1,
2020, "Threat Elements" in Half II, Merchandise 1A of our Quarterly Report on Kind 10-Q
for the quarter ended Could 2, 2020 and in Half II, Merchandise 1A of this Quarterly
Report on Kind 10-Q.

Common

Administration's Dialogue and Evaluation of Monetary Situation and Outcomes of
Operations is meant to offer info to help the reader in higher
understanding and evaluating our monetary situation and outcomes of operations.
We encourage you to learn this together with our Condensed Consolidated
Monetary Statements and the notes thereto included in Half I, Merchandise 1 of this
Quarterly Report on Kind 10-Q, in addition to our Annual Report on Kind 10-Okay for the
fiscal 12 months ended February 1, 2020 as filed with the SEC.

Overview of Our Enterprise

Shoe Carnival, Inc. is without doubt one of the nation's largest household footwear retailers,
offering the comfort of buying at any of our retailer areas, our cell
app or on-line at www.shoecarnival.com. Our shops mix aggressive pricing
with a promotional, high-energy in-store setting that encourages buyer
participation and injects enjoyable and pleasure into each buying expertise. We
imagine our distinctive buying expertise provides us numerous aggressive
benefits, together with elevated a number of unit gross sales; the constructing of a loyal,
repeat buyer base; the creation of word-of-mouth promoting; and enhanced
sell-through of in-season items. An identical buyer expertise is mirrored in
our e-commerce website and cell app via particular promotions and restricted time
gross sales.

Our goal is to be the vacation spot retailer-of-choice for value-priced,
on-trend branded and personal label footwear. Our product assortment consists of
costume and informal footwear, sandals, boots and a large assortment of athletic footwear
for the complete household. Our common retailer carries footwear in 4 common
classes - girls's, males's, youngsters's and athletics, in addition to a broad vary
of equipment comparable to socks, belts, shoe care gadgets, purses, hats, sport
luggage, backpacks and wallets. Footwear is organized by class and model,
creating robust model statements throughout the aisles. These model statements are
underscored by branded signage on endcaps and in-line signage all through the
retailer. Our signage could spotlight a vendor's product choices or gross sales
promotions, or could spotlight seasonal or life-style

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statements by grouping related footwear from a number of distributors. Our e-commerce
website affords clients a big assortment of merchandise in all classes of
footwear with an elevated depth of sizes and colours that will not be out there
in all shops.

Crucial Accounting Insurance policies

We use judgment in reporting our monetary outcomes.  This judgment entails
estimates based mostly partly on our historic expertise and incorporates the influence
of the present common financial local weather and company-specific circumstances.
Nonetheless, as a result of future occasions and financial circumstances are inherently unsure,
our precise outcomes might differ materially from these estimates.  Our accounting
insurance policies that require extra vital judgments embody these with respect to
merchandise inventories, valuation of long-lived property, leases, insurance coverage
reserves and earnings taxes. The accounting insurance policies that require extra vital
judgment are mentioned in our Annual Report on Kind 10-Okay for the fiscal 12 months
ended February 1, 2020. There have been no materials adjustments to our vital
accounting insurance policies and estimates mentioned in our Annual Report on Kind 10-Okay
for the fiscal 12 months ended February 1, 2020.

Outcomes of Operations Abstract Info



                                                  Variety of Shops                         Retailer Sq. Footage
                                  Starting                                  Finish of         Internet            Finish          Comparable
Quarter Ended                     Of Interval       Opened        Closed       Interval       Change        of Interval      Retailer Gross sales
Could 2, 2020                              392             0            2          390       (22,000 )     4,198,000            (42.3 )%
August 1, 2020                           390             2           10          382       (66,000 )     4,132,000             12.6 %

Yr-to-date                             392             2           12          382       (88,000 )     4,132,000            (14.0 )%

Could 4, 2019                              397             0            2          395       (22,000 )     4,246,000             (0.2 )%
August 3, 2019                           395             0            2          393       (16,000 )     4,230,000              1.4 %

Yr-to-date                             397             0            4          393       (38,000 )     4,230,000              0.6 %




Comparable retailer gross sales for the intervals indicated embody shops which have been
open for 13 full months after such retailer's grand opening previous to the start
of the interval, together with these shops which have been relocated or reworked.
Subsequently, shops opened or closed throughout the intervals indicated should not included
in comparable retailer gross sales. We embody e-commerce gross sales in our comparable retailer
gross sales. Resulting from our multi-channel retailer technique, we view e-commerce gross sales as
an extension of our bodily shops.



The next desk units forth our outcomes of operations expressed as a
share of web gross sales for the intervals indicated:


                                          13             13            Twenty-six            Twenty-six
                                        Weeks Ended          Weeks Ended          Weeks Ended           Weeks Ended
                                       August 1, 2020       August 3, 2019       August 1, 2020        August 3, 2019
Internet gross sales                                        100.0 %              100.0 %              100.0 %               100.0 %
Price of gross sales (together with shopping for,
distribution and
  occupancy prices)                                72.5                 69.4                 74.6                  69.9
Gross revenue                                      27.5                 30.6                 25.4                  30.1
Promoting, common and administrative
bills                                          22.7                 24.8                 27.4                  24.1
Working earnings/(loss)                            4.8                  5.8                 (2.0 )                 6.0
Curiosity earnings                                    0.0                  0.0                  0.0                   0.0
Earnings tax expense/(profit)                       1.5                  1.4                 (0.6 )                 1.1
Internet earnings/(loss)                                  3.3 %                4.4 %               (1.4 )%                4.9 %



Info concerning the COVID-19 Coronavirus Pandemic (“COVID-19”)

We proceed to intently monitor and handle the influence of the COVID-19 pandemic,
and the security and well-being of our clients, workers and enterprise companions
stays a high precedence. The COVID-19 pandemic has considerably impacted and is
anticipated to proceed to influence our operations, provide chains, general financial
circumstances and shopper spending for the foreseeable future. As steerage and
mandates from governments and well being officers proceed to evolve, closures of
some or all our shops could reoccur, and gross sales, together with e-commerce gross sales, could
be diminished. The COVID-19 pandemic has delayed and lengthened the back-to-school
buying interval and, right now, appreciable uncertainty exists concerning how
the COVID-19 pandemic could have an effect on the Christmas buying interval.



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In response to the COVID-19 pandemic, all of our brick-and-mortar shops had been
closed efficient March 19, 2020 and considerably all of our shops had been closed
for roughly 50% of the primary fiscal quarter of 2020. Our web site and
cell app continued to simply accept orders after March 19, 2020 and e-commerce gross sales
elevated considerably as buyer shopping for habits shifted to our on-line
channel. Roughly 50% of our shops had been reopened by the start of our
second quarter and considerably all shops had reopened by early June. As
shops have reopened, we skilled will increase in conversion, complete common
transaction and items per transaction regardless of diminished visitors because of the
COVID-19 pandemic. Typically, because the reopenings, gross sales exceeded our unique
fiscal 2020 plan, with some shops exceeding plan and different shops exhibiting
declines. Within the final two weeks of the second quarter of fiscal 2020, we
skilled declines in gross sales in comparison with the prior 12 months resulting from delays in
back-to-school begin dates.  In our markets, faculty district introduced return
dates are on common roughly two to a few weeks later than the prior 12 months
and we count on fiscal 2020 back-to-school buying to proceed into October. 

As

of August 31, 2020, 65% of colleges in our markets have gone again to high school,
in comparison with 95% in a typical 12 months’s back-to-school buying interval.



We've undertaken quite a few actions to mitigate the monetary influence of the
COVID-19 pandemic, protect capital and preserve our clients and workers secure.
These actions embody:

• Implementing new well being and security procedures at our shops, company

headquarters and distribution middle. Supplies, comparable to thermometers,

cleansing provides, new social distancing signage, and private protecting

tools have been distributed to our services.

• Enhancing our liquidity by exercising the total accordion function underneath our

present credit score facility to extend our borrowing capability underneath the

facility, now collateralized by our stock, from $50.Zero million to $100.0

million, and eliminating a covenant via the primary quarter of fiscal 12 months

2021 which will have restricted our entry to the elevated borrowing capability.

• Suspending repurchases underneath our share repurchase program till additional

discover.

• Persevering with to pay workers whereas our shops had been closed and recording tax

credit in promoting, common and administrative (“SG&A”) bills that offset

wage expense. This credit score was related to the Coronavirus Help, Aid,

and Financial Safety (“CARES”) Act, and represents an worker retention

tax credit score to help wages paid to workers whereas such workers weren’t

working.

• Reaching agreements with a lot of our landlords to defer April, Could and June

lease funds. We continued to acknowledge lease expense on a straight-line

foundation in accordance with Typically Accepted Accounting Ideas.

• Quickly decreasing the bottom salaries of our executives and different senior

members of the administration group and the annual money retainer payment of the Board

of Administrators and delaying the implementation of wage will increase for sure

workers whereas a majority of our brick-and-mortar shops had been closed.

• Decreasing stock receipts and stock available and lengthening fee

phrases with a lot of our enterprise companions.

• Decreasing or deferring non-essential company spending and capital initiatives

and implementing hiring freezes.

• Suspending advertising and marketing actions for brick-and-mortar shops and evaluating

      promotional actions.




On account of persevering with to straight-line lease expense and pay our workers,
our working bills within the first and second quarters of fiscal 2020 had been
usually in keeping with the comparable intervals from the prior fiscal
12 months. Nonetheless, market volatility principally brought on by the COVID-19 pandemic has
impacted our deferred compensation liabilities and, consequently, our general
working bills. Yr-to-date in fiscal 2020, we recorded $2.5 million in
impairment expenses on long-lived property for eight underperforming shops and
have closed 12 shops. Given the uncertainties surrounding the COVID-19
pandemic, further impairments and closures could end in future intervals.

Government Abstract for Second Quarter Ended August 1, 2020



Our second quarter gross sales have traditionally been impacted by seasonality, the
timing of tax free holidays and back-to-school buying. Within the second quarter
of fiscal 2020, our historic gross sales patterns had been considerably impacted by the
COVID-19 pandemic, leading to a shift in buyer conduct away from grownup
costume product to increased demand within the grownup athletics, youngsters's sandals and
toddler shoe classes. The pandemic additionally impacted the timing of back-to-school
begin dates in our working markets, leading to decrease gross sales within the final two
weeks of the second quarter in comparison with the prior 12 months. Classes comparable to
youngsters's athletics had been negatively impacted by the delay in back-to-school
buying, posting a comparable retailer gross sales lower within the low double-digits in
the second quarter of fiscal 2020.



Highlights for the second quarter of fiscal 2020 and a quick dialogue of some
key initiatives are as follows:

• Internet gross sales had been a document $300.Eight million for the second quarter, growing

4.6% in comparison with our earlier document gross sales set within the third quarter of

fiscal 2017. In comparison with the prior 12 months second quarter, web gross sales elevated

      $32.6 million, or 12.1%. Internet gross sales


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via our e-commerce platform elevated 332% in comparison with the prior 12 months

interval and represented over 20% of complete revenues. This drove a chain-wide

comparable retailer gross sales improve of 12.6% throughout the second quarter of fiscal

2020.

• Gross revenue was usually flat, growing $0.5 million, or 0.6%, for the

quarter ended August 1, 2020, in comparison with the quarter ended August 3, 2019.

As a share of web gross sales, gross revenue decreased to 27.5% in comparison with

30.6% within the second quarter of fiscal 2019. Merchandise margin decreased by

3.7% quarter-over-quarter resulting from increased shipping-related prices related

with e-commerce gross sales and an elevated mixture of grownup athletic gross sales. Athletic

merchandise usually carry decrease margins in comparison with seasonal heat climate and

costume merchandise. Of our $32.6 million improve in web gross sales, $29.Zero million

was attributable to increased males’s and ladies’s athletic gross sales. Our purchasing,

distribution and occupancy prices, that are usually mounted in nature,

decreased 0.6% as a share of web gross sales in comparison with the second quarter

      of fiscal 2019 because of the leveraging impact of upper gross sales.



• Internet earnings for the quarter ended August 1, 2020 was $10.1 million, or $0.71

      per diluted share, in comparison with web earnings of $11.Eight million, or $0.80 per
      diluted share, for the quarter ended August 3, 2019. This lower was

primarily attributable to a decrease gross margin and the next efficient earnings

tax price.

• We ended the quarter with no money borrowings excellent and $76.9 million

of money and money equivalents on our Condensed Consolidated Steadiness Sheet.

• We additional amended our Credit score Settlement throughout the second quarter of fiscal

2020 to eradicate a covenant via the primary quarter of fiscal 12 months 2021

that would have restricted entry to our $100 million of borrowing capability.

• Within the second quarter of fiscal 2020, we launched superior third-party

transportation and warehouse administration platforms. We plan to deploy a

third-party order administration system within the third quarter of fiscal 2020. We

are dedicated to implementing finest practices in these areas and imagine

these enhanced methods will allow us to satisfy the advanced calls for of

multi-channel achievement, place us for long-term development and improve

      buyer satisfaction and comfort in an more and more aggressive
      setting.


   •  In fiscal 2020, we commenced implementation of a brand new, third-party
      merchandise planning system. This hosted, cloud-based platform is a

multi-year venture that features a full vary of vital monetary

planning features that can improve the effectivity and effectiveness of our

merchandise shopping for course of. The brand new merchandise planning system will present

      a unified strategic planning and budgeting course of that's supported by
      numerous options, together with strategic and assortment planning, retailer
      allocation and replenishment and in-season administration. We imagine this

collaborative platform will unify our purchase plans, optimize stock ranges,

assist obtain extra gross sales at increased margins and permit us to set objectives for

a number of channels and codecs frequent in right this moment’s aggressive setting.

• Within the second quarter of fiscal 2020, we continued to extend the

membership in our Shoe Perks buyer loyalty program, including over 2 million

members in comparison with the second quarter of the prior 12 months, which introduced

complete membership to over 25 million clients as of August 1, 2020. The

variety of our most loyal clients, those that qualify for the Gold tier,

elevated 11.7% in comparison with the second quarter of the prior 12 months and

characterize roughly 16.2% of complete Shoe Perks members as of August 1,

2020. We imagine our Shoe Perks program affords us alternatives to

talk, construct relationships and have interaction with our most loyal buyers,

which we imagine will end in long-term gross sales good points.

Outcomes of Operations for the Second Quarter Ended August 1, 2020

Internet Gross sales

Internet gross sales had been $300.Eight million throughout the second quarter of fiscal 2020, a 12.1%
improve over the prior 12 months's second quarter web gross sales of $268.2 million.
Comparable shops gross sales elevated 12.6% and e-commerce gross sales elevated 332%
quarter-over-quarter. With respect to product combine, extra athletic footwear had been offered
within the quarter which drove increased income.

Gross Revenue

Gross revenue was basically flat quarter over quarter and gross revenue margin
decreased to 27.5% in comparison with 30.6% within the second quarter of fiscal 2019. The
lower in margin was primarily resulting from increased shipping-related prices related
with the rise in e-commerce gross sales and a product combine encompassing elevated
grownup athletics, which usually carry decrease margins in comparison with seasonal and
different non-athletic merchandise. These decreases had been partially offset by the
leveraging impact of upper gross sales on shopping for, distribution, and occupancy prices,
that are usually mounted in nature.

Promoting, Common and Administrative Bills

SG&A bills elevated $1.Eight million within the second quarter of fiscal 2020 to
$68.2 million in comparison with $66.Four million within the second quarter of fiscal 2019.
The first elements had been as follows:

• E-commerce achievement prices elevated $1.Eight million on increased gross sales via

      that channel.


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• Incentive compensation expense elevated roughly $1.Three million resulting from

      improved monetary efficiency.


   •  Resulting from monetary market volatility, our deferred compensation plan

skilled increased returns in comparison with the prior 12 months, which elevated

working bills by roughly $1.Three million year-over-year.

• Retailer-level wages decreased $1.9 million. This lower was primarily

attributable to an worker payroll retention tax credit score, a element of the

CARES Act that was signed into regulation in March 2020. We’ve not furloughed

any workers. This credit score lowered our payroll tax expense to help wages

paid to our workers whereas they weren’t working.

Earnings Taxes

The efficient earnings tax price for the second quarter of fiscal 2020 was 29.6% as
in comparison with 24.5% for a similar interval in fiscal 2019. Our provision for earnings
taxes relies on the present estimate of our annual efficient tax price and is
adjusted as essential for quarterly occasions. The rise in efficient price in
the quarter was primarily resulting from a reversal of a web working loss carryback
recorded within the first quarter of fiscal 2020 resulting from improved monetary
efficiency. For the total fiscal 12 months of 2020, we count on our tax price to be
roughly 23% in comparison with our 21.6% efficient tax price in fiscal 2019.

Outcomes of Operations for the Six-Month Interval Ended August 1, 2020

Internet Gross sales

Internet gross sales had been $448.Three million year-to-date in fiscal 2020, a 14.1% lower over
the prior 12 months's year-to-date web gross sales of $522.Zero million. The lower in web
gross sales was primarily because of the short-term closure of our brick-and-mortar shops
for roughly 50% of the primary quarter of fiscal 2020 on account of the
COVID-19 pandemic. The lower in brick-and-mortar gross sales was partially offset
by a 249% improve in e-commerce gross sales year-over-year as our clients shifted
to on-line buying amid authorities mandated stay-at-home orders.

Gross Revenue

Yr-to-date gross revenue margin for fiscal 2020 decreased to 25.4% in comparison with
30.1% year-to-date in fiscal 2019. The lower was primarily resulting from increased
shipping-related prices related to the rise in e-commerce gross sales, a
increased mixture of grownup athletic gross sales that carry decrease margins and the deleveraging
impact of decrease gross sales, totally on occupancy prices, that are mounted in nature.

Promoting, Common and Administrative Bills

Yr-to-date SG&A decreased $3.Zero million to $122.9 million on a year-to-date
foundation in comparison with $126.Zero million in fiscal 2019. The first elements had been as
follows:

• Retailer-level wages decreased $5.7 million. This lower was primarily

attributable to an worker payroll retention tax credit score, a element of the

CARES Act that was signed into regulation in March 2020. We’ve not furloughed

any workers. This credit score lowered our payroll tax expense to help wages

paid to our workers whereas they weren’t working.

• E-commerce achievement prices elevated $3.Three million resulting from increased gross sales

via that channel.

• Share-based compensation expense decreased roughly $1.5 million as

fewer share-based awards had been excellent throughout fiscal 2020 and awards

granted within the first quarter of fiscal 2020 had been issued at a decrease share

value and vest over an extended interval in comparison with awards granted in prior

years.

• Our deferred compensation plan skilled diminished returns in comparison with the

prior 12 months, which decreased working bills roughly $0.Eight million

      year-over-year.


   •  Depreciation and amortization included in promoting, common and

administrative bills declined roughly $1.Zero million year-over-year

primarily resulting from working fewer shops throughout fiscal 2020.

• Throughout fiscal 2020, we recorded impairment expenses on long-lived property

totaling $2.5 million on eight underperforming shops, in comparison with $40,000

      recorded within the prior 12 months.


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Earnings Taxes

The efficient earnings tax price year-to-date for fiscal 2020 was 31.5% as in contrast
to 18.6% for a similar interval in fiscal 2019. The first purpose for the change
in our efficient tax price was the $1.9 million tax profit associated to the
vesting of equity-based compensation acknowledged within the first quarter of fiscal
2019 and the timing of different discrete tax changes.

Liquidity and Capital Sources

Our main sources of liquidity are money and money equivalents available, receipts
from clients and availability underneath our credit score facility. Whereas the financial
uncertainty and future results on buyer conduct brought on by the COVID-19
pandemic make our working money circulate much less predictable, we imagine our assets
will likely be adequate to fund our money wants, as they come up, for not less than the subsequent
12 months. Our main makes use of of money are working capital wants, that are
principally stock purchases, retailer initiatives, dividend funds, the
financing of capital initiatives, together with investments in new methods, and numerous
different commitments and obligations. We've suspended repurchases underneath our share
repurchase program to protect liquidity throughout the COVID-19 pandemic.



Money Movement – Working Actions

Our web money generated from working actions was $26.2 million within the first
six months of fiscal 2020 in comparison with web money generated from working
actions of $10.Zero million within the first six months of fiscal 2019. The rise
in working money circulate was primarily pushed by the timing of vendor funds for
stock, partially offset by diminished money receipts on decrease gross sales and our
continued funding in software program as a service hosted preparations.



Working capital decreased to $200.1 million at August 1, 2020 from $212.3
million
at August 3, 2019, primarily resulting from decrease stock positions and
elevated accounts payable in comparison with the primary six months of fiscal 2019. Our
present ratio was 2.Zero as of August 1, 2020 in comparison with 2.2 as of August 3,
2019
.

Money Movement – Investing Actions

Our money outflows for investing actions are primarily for capital
expenditures. Yr-to-date in fiscal 2020, we expended $7.2 million for the
buy of property and tools, primarily associated to investments in
expertise and regular asset substitute actions. In the course of the first half of
fiscal 2019, we expended $11.5 million for the acquisition of property and
tools, of which roughly $7.Zero million was for the acquisition of our
company headquarters and the rest was for continued investments in
expertise and regular asset substitute actions.

Money Movement – Financing Actions

Our money outflows for financing actions are primarily for money dividend
funds, share repurchases and funds on our credit score facility. Shares of our
frequent inventory could be both acquired as a part of a publicly introduced repurchase
program or withheld by us in reference to worker payroll tax withholding
upon the vesting of fairness awards. Our money inflows from financing actions
have represented purchases underneath our Worker Inventory Buy Plan and borrowings
underneath our credit score facility.

Yr-to-date in fiscal 2020, web money utilized in financing actions was $4.2
million in comparison with $28.1 million year-to-date in fiscal 2019. The lower in
web money utilized in financing actions was primarily because of the suspension of
repurchases underneath our share repurchase program and fewer shares withheld upon
the vesting of fairness awards throughout the first quarter of fiscal 2020 in comparison with
the primary quarter of fiscal 2019. Throughout fiscal 2020, we borrowed and repaid
$24.9 million underneath our credit score facility. We had no excellent borrowings underneath
our credit score facility at August 1, 2020. Yr-to-date in fiscal 2019, we borrowed
and repaid $20 million underneath our credit score facility.

Letters of credit score excellent had been $1.2 million at August 1, 2020. Our credit score
facility requires us to take care of compliance with numerous monetary covenants,
probably the most restrictive of that are disclosed in Word 7 - "Debt" to our Notes to
Condensed Consolidated Monetary Statements contained in Half I, Merchandise 1 of this
Quarterly Report on Kind 10-Q. We had been in compliance with these covenants as of
August 1, 2020.



Capital Expenditures



Capital expenditures for fiscal 2020, together with precise expenditures throughout in
the primary half of that fiscal 12 months, are anticipated to be $15 million to $16
million, with roughly $Eight million to $10 million for use for brand spanking new shops,
relocations and remodels and roughly $Three million to $Four million for upgrades
to our distribution middle. The remaining capital expenditures are anticipated to
be incurred for numerous different retailer enhancements, continued investments in
expertise and regular asset substitute actions. The assets allotted to
these initiatives are topic to near-term adjustments relying on the impacts
related to the COVID-19 pandemic. Additional, the precise amount of money
required for capital expenditures for retailer operations relies upon partly on the
variety of shops opened, the variety of shops relocated, the quantity of lease
incentives, if any, obtained from landlords and the variety of shops

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reworked. The variety of new retailer openings and relocations will likely be dependent
upon, amongst different issues, the provision of fascinating areas, the
negotiation of acceptable lease phrases and common financial and enterprise
circumstances affecting shopper spending.

Retailer Openings and Closings – Fiscal 2020



Growing market penetration by opening new shops has traditionally been a key
element of our development technique, and we proceed to give attention to producing
optimistic long-term monetary efficiency for our retailer portfolio. In fiscal
2020, we count on to open 4 new shops inside our present 35-state geographic
footprint, two of which had been opened within the second quarter. Within the first half of
fiscal 2020, we closed 12 shops. We count on to shut one further retailer in
fiscal 2020. We count on to pursue alternatives for brick-and-mortar retailer development
throughout giant and mid-size markets as we leverage buyer knowledge from our buyer
relationship administration program and extra engaging actual property choices turn into
out there. Additional, our future retailer development could proceed to be impacted by the
present financial uncertainty related to the COVID-19 pandemic.

We frequently analyze our portfolio of shops, with a focus on
underperforming shops, to satisfy our long-term aim of accelerating shareholder
worth. Our goal is to establish and deal with underperforming shops that
produce low or unfavourable contribution and both renegotiate lease phrases,
relocate or shut the shops. Regardless that retailer closings might cut back our
general web gross sales quantity, we imagine this technique will understand long-term
enchancment in working earnings and diluted web earnings per share. Relying upon
the outcomes of lease negotiations with sure landlords of underperforming
shops, we could improve or lower the variety of retailer closures in future
intervals. The timing and precise quantity of expense recorded in closing a retailer can
range considerably relying, partly, on the interval during which administration commits
to a closing plan, the remaining foundation within the mounted property to be disposed of at
closing and the quantity of any lease buyout. We'll proceed to evaluation our retailer
portfolio based mostly on our view of the interior and exterior alternatives and
challenges within the market.

Dividends

On June 11, 2020, our Board of Administrators accepted the fee of our second
quarter money dividend to our shareholders. The second quarter dividend of $0.090
per share was paid on July 20, 2020 to our shareholders of document as of the
shut of enterprise on July 6, 2020. The quantity per share represents a 5.9%
improve over the primary quarter dividend of $0.085 per share paid on April 20,
2020. Throughout fiscal 2019, the primary quarter dividend was within the quantity of $0.080
per share and the second quarter dividend was $0.085 per share. In the course of the first
half of fiscal 2020 and 2019, we returned $2.6 million and $3.2 million,
respectively, to our shareholders via our quarterly money dividends.

The declaration and fee of any future dividends are on the discretion of the
Board of Administrators and can rely on our outcomes of operations, monetary
situation, enterprise circumstances and different elements deemed related by our Board of
Administrators. Our credit score facility permits the fee of money dividends so long as
no default or occasion of default exists underneath the credit score settlement each
instantly earlier than and instantly after giving impact to the money dividends,
and the combination amount of money dividends for a fiscal 12 months don't exceed $10.0
million. See Word 7 - "Debt" to our Notes to Condensed Consolidated Monetary
Statements contained in Half I, Merchandise 1 of this Quarterly Report on Kind 10-Q for
an additional dialogue of our credit score facility and its covenants.

Share Repurchase Program

On December 12, 2019, our Board of Administrators approved a brand new share repurchase
program for as much as $50.Zero million of excellent frequent inventory, efficient January
1, 2020. The purchases could also be made within the open market or via privately
negotiated transactions from time-to-time via December 31, 2020 and in
accordance with relevant legal guidelines, guidelines and rules. The share repurchase
program could also be amended, suspended or discontinued at any time and doesn't
commit us to repurchase shares of our frequent inventory. We've funded, and intend
to proceed to fund, the share repurchase program from money available, and any
shares acquired will likely be out there for stock-based compensation awards and different
company functions. The precise quantity and worth of the shares to be bought
will rely on the efficiency of our inventory value and different market
circumstances. As of August 1, 2020, we had bought roughly 184,000 shares
at an combination value of $6.9 million underneath this share repurchase program, and we
had $43.1 million out there for future repurchases. No share repurchases have
been made in fiscal 2020, and, given the uncertainty related to the
COVID-19 pandemic, we don't anticipate repurchasing any shares in fiscal
2020. Nonetheless, we count on to reevaluate additional share repurchases on an ongoing
foundation.

                                       22
--------------------------------------------------------------------------------
The brand new share repurchase program changed the prior $50.Zero million share
repurchase program that was approved in December 2018 and expired in
accordance with its phrases on December 31, 2019. At its expiration, we had
bought roughly 933,000 shares at an combination value of $30.9 million
underneath the prior repurchase program, together with 411,168 shares of frequent inventory at
a complete value of $14.Zero million year-to-date in fiscal 2019.

Our credit score facility stipulates that distributions within the type of redemptions of
Fairness Pursuits (as outlined within the credit score settlement) could be made solely with
money available as long as earlier than and instantly after such distributions there
aren't any revolving loans excellent underneath the credit score settlement. See Word 7 -
"Debt" to our Notes to Consolidated Monetary Statements contained in Half I,
Merchandise 1 of this Quarterly Report on Kind 10-Q for an additional dialogue of our
credit score facility and its covenants.

Seasonality and Quarterly Outcomes

Our quarterly outcomes of operations have fluctuated and are anticipated to proceed
to fluctuate sooner or later, primarily on account of seasonal variances and the
timing of gross sales and prices related to opening new shops and shutting
underperforming shops. Non-capital expenditures, comparable to promoting and
payroll incurred previous to the opening of a brand new retailer, are charged to expense as
incurred. The timing and precise quantity of expense recorded in closing an
particular person retailer can range considerably relying, partly, on the interval in
which administration commits to a closing plan, the remaining foundation within the mounted
property to be disposed of at closing and the quantity of any lease
buyout. Subsequently, our outcomes of operations could also be adversely affected in any
quarter during which we incur pre-opening bills associated to the opening of latest
shops or incur retailer closing prices associated to the closure of present shops.

We've three distinct peak promoting intervals: Easter, back-to-school and
Christmas. Our working outcomes rely considerably upon the gross sales generated
throughout these intervals. To organize for our peak buying seasons, we should order
and preserve in inventory considerably extra merchandise than we'd carry throughout
different components of the 12 months. We skilled diminished gross sales throughout the fiscal 2020
Easter season on account of the COVID-19 pandemic. We canceled any seasonal
merchandise that had a brief promoting window and moved seasonal merchandise with
longer promoting intervals to later transport dates, as relevant. The
back-to-school buying interval has additionally been impacted by the COVID-19 pandemic
and is scheduled to start out later and last more than earlier years in a lot of
our markets. Within the final two weeks of the second quarter of fiscal 2020, we
skilled comparable retailer gross sales declines in comparison with the identical interval within the
prior 12 months because of the delay in back-to-school begin dates. We anticipate that
roughly 40% of faculty districts within the markets the place we function will
return with virtual-only instruction, which can lower our gross sales in these
markets. Every other unanticipated lower in demand for our merchandise throughout
these peak buying seasons might require us to promote extra stock at a
substantial markdown, which might cut back our web gross sales and gross margins and
negatively have an effect on our profitability.

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