Shoe Carnival, Inc.’s (SCVL) CEO Clifton Sifford on Q4 2019 Results – Earnings Call Transcript

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Shoe Carnival, Inc. (NASDAQ:SCVL) Q4 2019 Results Earnings Conference Call March 25, 2020 4:30 PM ET

Company Participants

Clifton Sifford – Vice Chairman and Chief Executive Officer

Mark Worden – President and Chief Customer Officer

Kerry Jackson – Senior Executive Vice President and Chief Financial and Administrative Officer

Conference Call Participants

Mitch Kummetz – Pivotal Research Group

Sam Poser – Susquehanna Financial Group

Christopher Svezia – Wedbush

Operator

Good afternoon and welcome to Shoe Carnival’s Fourth Quarter Fiscal 2019 Earnings Conference Call. Today’s conference 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 in 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 or contained in today’s press release to reflect future events or developments.

I will now turn the call over to Mr. Cliff Sifford, Vice Chairman and CEO of Shoe Carnival for opening comments. Mr. Sifford you may begin.

Clifton Sifford

Thank you and welcome to Shoe Carnival’s 2019 fourth quarter and full year earnings conference call. Joining me on the call today is Mark Worden, President and Chief Customer Officer; and Kerry Jackson, Senior Executive Vice President Chief Financial and Administrative Officer.

On today’s call, I’ll provide an overview of our 2019 fiscal year and fourth quarter results as well as the ongoing COVID-19 pandemic. Mark will then update you on the progress we’ve made on our strategic initiatives, following that Kerry will discuss the financial results in further detail. We will then open the call for your questions.

Let me start with a business update on the impact of COVID-19. As you saw in our press release last week, we made the decision to temporarily close our stores until April 2. While this was not an easy decision, the health and safety of our employees, our customers and the communities we serve is our primary concern. As noted we will continue to pay our associates as scheduled during this time and serve our loyal customers through our website.

For e-commerce order fulfillment we are allowing our managers to fulfill orders from our stores in locales where we are able. We are adhering to guidelines from the World Health Organization and the CDC as well as practicing social distancing. We have also implemented enhanced cleaning and sanitation processes to ensure the safety of our employees today and making sure our customers feel safe when we reopen our stores in the future.

The rapid spread of this virus has far reaching implications for our global community and while we anticipate that this pandemic will have an impact on our operations today, we are thinking about those who have been affected by this deadly virus and the continued havoc it is causing within our communities. Our store closures we believe are a necessary step for us to do our part to prevent the further spread of this virus.

From an operational standpoint, we have been working closely with each of our vendors to determine the full impact to our supply chain and we thank them for their collaboration as we navigate this unprecedented situation. Our best-in-class merchant teams have been diligently managing inventories to ensure that we are keeping things at a controllable level. Furthermore, we are working to control costs where possible including reducing SG&A to preserve margin and capital expenditures to maintain our financial flexibility.

Shoe Carnival has a long history of navigating through various difficult cycles, both good and bad. Our team is incredibly disciplined and able to move quickly as conditions change. In addition, we have always maintained a very strong financial position and balance sheets for times just like these.

At the end of February we had $57 million in cash and ample liquidity with our $50 million credit facility. While today there are many unknowns we are monitoring the situation closely and we feel very well prepared to meet the needs of our stakeholders during this difficult time.

Now turning to our fiscal year 2019 results. We reported another record year for Shoe Carnival. Sales rose to $1.037 billion while net income increased 13% to $42.9 million or $2.92 per diluted share, both exceeding our expectations. At the same time, comparable store sales increased 1.9% marking the 11th consecutive year of comparable store sales growth.

Last year at this time we’ve talked about our journey to enhance our leadership position in the family foot ware channel. Shoe Carnival has one of the most distinct brands in this space with a well tenured buying organization that has a proven ability to see trends well ahead of others in this space. In addition, our unique selling concept has distinct brand advantages and assets that resonate with our consumer setting us apart from our competitors.

Despite the challenging times we are facing, our team continues to focus on four key initiatives; our CRM program, our brand and customer experience, online sales, and store development. To date, we have made tremendous progress on all fronts, but I would like to take a few minutes and talk about the success of our loyalty membership program Shoe Perks, which underscores the investments we have made in our CRM initiative.

In 2019 our loyalty program grew double-digits resulting in sales growth of over $35 million versus the year and now exceeds 23 million members. This equates to a mid-single digit sales growth for the program in 2019 compared to company comparable growth of low single digits for the same period. Even more promising is the growth of our global tier [ph] which posted double-digit membership growth and comparable sales. Mark will provide greater detail on this and our other initiatives in a moment, but suffice it to say, we are very encouraged with the success we have had thus far.

Moving to our financial results for the fourth quarter of 2019 which capped off another strong year for Shoe Carnival. During the quarter conversion, average transaction and units per transaction, each grew low single digits and we ended the fourth quarter with 392 stores in 35 states and Puerto Rico, closing six stores during the year.

Looking at comparable store sales by department for the quarter, women’s nonathletic was up mid-single digits driven primarily by strong demand in women’s dress shoes partially offset by declines in boots which were negatively impacted by mild winter weather throughout the quarter. Excluding boots, women’s nonathletic was up double-digits in the fourth quarter.

Men’s nonathletic was up low single digits supported by mid-single-digit growth in casual shoes and seasonal boots offset by declines in dress shoes. Children’s nonathletic including sandals, casual, and dress shoes continued to form well helping drive low single digits comparable growth. Adult athletic overall were down modestly driven by low single digit growth in women’s athletic offset by men’s athletic low single digit declines.

For the fourth quarter of 2019, merchandise margins were up 70 basis points while BD&O expenses were flat as a percentage of sales compared to the prior year. Even more importantly for fiscal 2019 we delivered the fourth consecutive year improvement in merchandise margins driven by favorable product mix of high growth categories. We are quite encouraged by these results as they demonstrate the capabilities of our merchant teams and leveraging our new CRM program to better identify seasonal trends enhancing the product selection available to our customers.

I’d also like to provide an update on our capital allocation strategy. Over the long-term return on capital to stakeholders remained a top priority. However, as we are still working to determine the full impact of the COVID-19 pandemic on Shoe Carnival, we are focused on maintaining a financial stream and flexibility of our business. With that being said, we do not currently plan to engage in any further share repurchases during fiscal year 2020, but will continue to reevaluate the strategy on an ongoing basis. At this time, we do not anticipate any changes to our quarterly cash dividend policy.

Before I hand the call to Mark, I want to remind you that as we stated in our press release last week, we will not be providing guidance for fiscal year 2020 given the significant uncertainty created by COVID-19. However, it is worth noting that as we began our fiscal year, comparable store sales through March 10, exceeded our expectations with comp store increase of 4.5% through that date. From that point forward we did see a significant decline in brick-and-mortar traffic leading up to our decision to close our stores, but we were pleased to see e-commerce traffic and sales have grown significantly. Mark will discuss this a bit more in his remarks.

With that overview, I’d like to turn the call over to Mark Worden to provide an update on our strategic initiatives. Mark?

Mark Worden

Thank you, Cliff. During 2019 Shoe Carnival made great strides advancing our four key initiatives; CRM, brand and customer experience, online sales and store development. We believe these four initiatives will drive long-term profitable growth for the business, strengthen our customer-centric organization, and expand our leadership position in the family footwear channel. We are very encouraged by the customers’ response to our 2019 CRM initiative.

We continue to see that impact captured by customer analytics coupled with our strategic marketing programs, our support and strengthened customer loyalty and ultimately value creation for shareholders. Information collected through the CRM provides our marketing, merchandising, analytics, real estate teams with a holistic view of our customer shopping behaviors, in turn helping us to identify tomorrow’s most valuable customers and deploy resources toward building long lasting loyalty.

To put a finer point on this, loyalty member sales grew over $35 million this year with the average transaction value of members roughly $10 higher than nonmembers. I am most encouraged by the rapid growth achieved with our Gold loyalty members, whose transaction value was over $16 higher than nonmembers for the year and both sales and membership count grew double-digit for the year.

Over the long term, our strategic priority remained centered on driving member sales to over 80% of total company revenue and this had the most effective customer reach as well as the highest ROI amongst our marketing channels. During 2019 the first year of the CRM implementation, member sales as a percentage of total corporate revenue reached 70% up from 68% in the prior year and exceeding our expectations.

Next, I’ll touch on our overall brand and customer experience initiative. We are very proud of the customer-centric experience we have continued to deliver. This, coupled with our broad product assortment for families, were key drivers to achieve our 11th consecutive year of comparable store sales growth. Store conversion growth was achieved every quarter of 2019 by our excellent store operators across 35 states and Puerto Rico underscoring the effectiveness of our store operators and our merchants.

Customer traffic during the fourth quarter and for the full year delivered growth exceeding our annual expectations with a double-digit increase of customers shopping within the Shoe Carnival omnichannel. Continuing the trend from the prior quarter, customer traffic increased at both our bricks-and-mortar stores and through our e-commerce platform during the fourth quarter.

More specifically, customer response to our marketing engagements during the core holiday shopping days was well above expectations as we saw strong omnichannel traffic results and sales. We are also continuing to see rapid acceleration of consumer demand for our online shopping experience which is our third initiative. Online sales grew over 15% during the year and exceeded 8% of annual total company revenues for the first time. Our online platforms surpassed multiple engagement milestones setting records throughout key shopping days throughout 2019.

In light of the current macroenvironment and our sourcing temporarily closed, we are shifting resources and marketing initiatives from brick-and-mortar to e-commerce to further accelerate our online growth trends. While these are very early days, I’m encouraged by the exceptional team effort to respond to the external challenges we are facing today. Online traffic has exceeded our expectations over the past year, but over the past week we have seen a steep acceleration of customer engagement online, driving triple-digits order increases.

Turning to our fourth initiative, store development, we opened one store and closed six in 2019. While long-term strategic new store growth remains a priority for us, we are reevaluating our 2020 and 2021 store plans in light of the uncertainty that exists today. With that said, our strategy remains consistent to open and operate stores within our existing 35-state footprint, to maximize value creation and customer loyalty.

Finally, we are working closely across the organization from our corporate team to our store operators and employees to ensure we are once again able to serve our clients in person as soon as we can safety reopen our stores. We believe the initiatives we are executing are deepening our customer relationships, strengthening our brand, and positioning Shoe Carnival for success over the long term. While we are very cognizant of heightened uncertainty that exists today, we believe we are taking the necessary steps to mitigate the impact near term.

With that, let me now turn the call over to Kerry Jackson to provide more insight into our financial performance.

Kerry Jackson

Thank you, Mark. Our net sales for the fourth quarter ended February 01, 2020 increased $5.2 million to $239.9 million compared to the fourth quarter of last year. This increase in net sales was attributable to 3.2% increase in comparable store sales and $720,000 increase attributed to the four new stores opened since October 2018, partially offset by a loss in sales of $3.3 million attributable to the 11 stores closed over the same time period.

Our gross profit margin for Q4 was 29.1% compared to 28.4% in Q4 of last year. Our merchandise margins increased 70 basis while buying, distribution, and occupancy expense was flat as a percentage of sales. The increase in the merchandise margin was primarily the result of being less promotional in Q4 other than the boot category and realized margin increases in our women’s dress and casual, children’s shoes and adult athletics.

SG&A expenses decreased slightly in Q4 to $65.1 million. As a percentage of net sales these expenses decreased to 27.1% compared to 27.8% in Q4 of last year primarily due to leveraging effects of higher sales. Significant changes in SG&A for Q4 included increases in wages and employee benefits which were offset by decreases in advertising, depreciation and operating fewer stores during the quarter.

The effective income tax rate for Q4 was 28.8% compared to 25.1% in the same period last year. For the full year of 2019, the effective income tax rate was 21.6% compared to 24.3% in the full-year 2018. Our effective income tax rate decreased in 2019 primarily due to a $1.9 million tax benefit related to divesting of stock based compensation recognized in Q1.

Net income for the fourth quarter was $3.5 million compared to net income of $1.4 million last year. Earnings per diluted share for the fourth quarter increased by $0.15 to $0.24 per diluted share. Weighted average diluted shares outstanding for Q4 this year decreased 7.2%.

Now turning to information affecting cash flow, depreciation expense was $4.3 million in Q4 and $17.0 million for the full-year compared to $5.3 million in Q4 last year and $21.8 million for the full year last year. Capital expenditures for fiscal 2019 were $18.5 million with approximately $10.4 million used for new stores, relocations, remodels, and the purchase of our corporate headquarters.

In the fourth quarter of this year we repurchased 184,000 shares of our common stock at a total cost of $6.9 million. In total, for the fiscal year we repurchased approximately $1.1 million shares of our common stock for a total cost of $37.8 million. In addition, for fiscal 2019 we returned $5.7 million to the shareholders through our quarterly cash dividends.

To reiterate, Cliff’s comments, we are comfortable with our current level liquidity. Our cash on hand along with access to an additional $50 million from our line of credit offers us the financial flexibility to run our business in this uncertain operating environment.

My last comment today is to remind our analysts and listeners that we won’t be able to address any questions that relate to fiscal 2020 quarterly or annual, sales, earnings, margins, expenses or inventory positions in any greater detail than we have discussed in our prepared remarks.

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

Question-and-Answer Session

Operator

Thank you. [Operator Instructions]

Clifton Sifford

Operator, we can take the first question.

Operator

We’ll take our first question from Mitch Kummetz with Pivotal Research.

Mitch Kummetz

Thanks for taking my questions and congrats on the quarter. I’m afraid that some of these might violate what Kerry was just saying, but let me try anyway. So you guys are – I think you are on day 7 of the 14-day closure period. It sounds like digital is doing really well. If I heard you correctly may be it is up triple digits since you closed the store, but is there any way you can give us some sense as to what the impact on sales and EBIT looks like during this period of closed stores like the first five or six days is there any way you can sort of frame that for us?

Clifton Sifford

Mitch, we’re not going to comment at all on any forward-looking activity in fiscal 2020. We won’t be addressing any sales margins, inventory positions. It is just not foreseeable right now so we’re not going to be addressing it at all.

Mitch Kummetz

All right. Let me try another one, I’m going to ask it may be in a different way. So you are probably not going to tell me if you are going to open stores after April 2nd, but can you at least say what you are looking at in order to inform that decision, is that kind of based on CDC guidelines, what’s being said at the state and federal level, I’m sure it is something you are going to have to make that call and I’m just kind of curious what is maybe going into your thinking.

Clifton Sifford

Mitch, as you know, each state, not every state, but each state has come out and issued statement that stores must be closed, not every state, but most. I think at some point the government will make a decision to allow or as you heard last night, the President wants to get back to business as quickly as possible. But the health and safety of our employees and our customers and our communities really are our primarily concern. So we are going to stay close until April 2nd and we will continue to follow guidance from the local and federal officials, whatever they say. And as you know, situations incredibly fluid and as soon as we know something, we’ll let you guys know.

Mitch Kummetz

And then may be just the last one, what can you say about leases? You know what recourse do you have? I know that Simon and some of the other landlords have shut down centers, I don’t know if that is impacting you whatsoever, but do you have any recourse if a center is closed or if there is a co-tenancy clause has been violated. I know April rents too soon, are you guys going to pay rent? How are you thinking about leases and is this going to end up in the hands of the lawyers as you kind of work through this so that you get some rent relief, or how are you thinking about that side of it? That is obviously a big expense for you guys.

Clifton Sifford

Mitch, that deal is directly with what the results would be for 2020 and how we’d operate within and we really can’t give you any guidance on that at this point in time.

Mitch Kummetz

Okay, fair enough, thanks guys.

Clifton Sifford

Thank you.

Operator

We’ll take our next question from Sam Poser with Susquehanna.

Sam Poser

Good afternoon and thanks for taking my questions, gentlemen. So I’m going to ask you a few sort of what ifs and then I’ve got some other things. One, if you are forced to – if you decide to keep the stores closed longer then April 2nd what seems like it is going to longer. Have you thought about how you are going to compensate your employees and yourselves for that matter? Some companies have come out today and say they are reducing some salaries for the year and so on and so forth.

And then it feels like they are using that to help their people. So can you give me some thought process on how you are thinking about that? I mean, I don’t know what happened in Indiana, but I know like in Alabama we could go Monday the cases in Alabama are 11 and there are 280. So that’s like, I mean so those how big an increase that is in a very short period of time. So and I could do the math, but how you are thinking about all that?

Clifton Sifford

You know Sam, as we stated last week, we’ll continue to pay our store associates as scheduled through April 2. And as you know, this is really a rapidly unfolding situation and we’ll provide any updates as appropriate on a go forward basis, but that is as far as I can go with that at this point.

Sam Poser

Okay, all right, and your e-commerce business, you said I believe that the e-commerce was 8% of total sales last year. Can you give us little more color on that that was sort of more recently let’s say in the fourth quarter and how that performed, was it, could it get stronger throughout the year, can you give us some color on that? That is not forward-looking.

Mark Worden

Yes Sam, hi it is Mark. We definitely see significant increases in online traffic, especially more recently once we announced the store closures, but in the fourth quarter we outperformed our expectations with very strong results during the peak holiday period. So both through the Thanksgiving through Cyber Monday as well as during the core holiday season we are very happy with the acceleration we say. And then over the last week of course we’ve seen the acceleration and it has been triple digit acceleration since we closed the stores.

Sam Poser

I understand, but my question really was this, it was 8% of total sales for the year, did it run at let’s say 10% or 12% in the fourth quarter, was it ramping as a percent of total sales. I mean, I’m just trying to get a feel for that, that will help sort of…?

Mark Worden

Sam, historically our fourth quarter e-com sales have been the strongest quarter of the year for us and this year was no different. So you are right in line.

Sam Poser

Okay, and then a couple of things, just housekeeping. What is sort of a normalized tax rate without that thing that happened last year, what would the, I mean if we’re thinking I know it is a 2020 question, but I mean if we’re thinking about a normalized tax rate like 23% 24%?

Mark Worden

Well, we’re not going to talk about 2020, but I will tell you that if you backed out the $1.9 million in our tax rate that actually occurred in 2019 our tax rate would have been about 25.1%. So I would say that similar between 24.5% and 25% would be a range that she could look at for the prior year on a normalized basis.

Sam Poser

Okay and then also, I know your share count, your average share count was 14.3 but you bought back a lot of stock. So with this no guidance, but what is sort of a starting share count for the year because it is always on 14.3, that was an average. So can you give us sort of where the actual share count is that you won’t be buying back from?

Mark Worden

So the outstanding shares you are asking at the end of year is closer is going to be about 14.2.

Sam Poser

Thanks. And then given this situation and given sort of its persuaded AM questioning how long this is all going to last? Are vendors starting to give you – are you getting data on orders and are you getting back dating orders that came in for the stem payment terms with your vendor partners?

Clifton Sifford

No Sam. We’ve always had a policy that we don’t talk about any negotiations with the vendors. I will tell you this that the vendors have been incredible to us and it shows, it tells me how important we are to them and how we treated them in the past. So the business of – been very cooperative.

Sam Poser

Well one vendor that will remain nameless went out – sent out a note apparently saying, you know for orders that came in x to x we’re extending the dating by 60 days and if you write orders through now and June 30 or something we’re going to give you an additional 60 days dating and they sent that out in a general letter to people.

So I’m not asking you for specifics on what the extension is or what companies are doing what. But I mean, can assume that you’ve gotten your payable stress to be able to reflect the time closed for the reason that you mentioned a general sense?

Mark Worden

We hate to keep referring back to this, but we’re not going to reference anything about the cash flows, the earnings, inventory positions of fiscal 2020 until we have better clarity on how the year is going to play out.

Clifton Sifford

The only thing I’ll add to that, Sam the only thing I’ll add to that is that I’m incredibly proud of the relationship that Shoe Carnival has been and built with the vendor community, so that as we navigate anything, good or bad, we know they have our back and that’s far as I am going to go with that.

Sam Poser

Okay and then lastly and I just might have missed this, could you give us what your same-store sales by month were? November, December, January, you can give us until February and March if you want because it is currently [indiscernible] anyway?

Clifton Sifford

Sam, directionally we were slightly negative, low single digits negative in November because it shipped Cyber Monday sales, we were up mid single digits in December and high singles in January.

Sam Poser

What was it that drove that high single digit increase in January?

Clifton Sifford

Well, we had a very strong sales in woman’s shoes in January. Believe it or not, we drove this without boots, boots were slightly negative in the month of January, but our women’s business was very strong, our kids business was very strong and I was very happy with our men’s nonathletic product as well.

Sam Poser

Okay, thank you very much and good luck with all this stuff going on right now.

Clifton Sifford

Thank you, Sam.

Operator

We will take our next question from Chris Svezia with Wedbush.

Christopher Svezia

Good afternoon everyone. Hope you are all doing well. I’ll ask you about the weather, since you are not going to answer anything else, so how is the weather suiting your guys?

Clifton Sifford

Actually it is beautiful here in Evansville today.

Christopher Svezia

Very nice, I’m kidding. So actually I’ve got questions and Kerry this way to easy for you. I’m just kidding, just in terms of defaulting to that statement. Anyway and also so you commented about the comp momentum up until March 10th and anyway you want to talk about it? What was driving that? I know you are just in reference to Sam’s questions you were answering the women’s business, the kids business, did athletic improve? What else was going on in the business up until that point that you feel comfortable enough you can comment or add some color about?

Kerry Jackson

Well, we continued to see our women’s business performed in the month of early February or through February. Tax refunds were actually out earlier this year and really believe that than they were last year. If you remember, we felt there was a delay in tax refunds last year into the March time period. So we think that they got out to the customers in February. This has actually accelerated as we got towards the end of February and then to the first seven or eight days of March.

So it’s done, that usually signals to me what we call taxmas here, but we were selling again women’s shoes. Our kids shoe business was very, very strong during the time period and we did see some acceleration in the athletic area, however not as much acceleration there as we saw in the nonathletic categories.

Christopher Svezia

Okay, in the women’s non-boot category record just a 4, just you are picking up market share I assume there have been comments about paying as to competitive environment, is that still or was that still about the case and the reason why that category was improving?

Kerry Jackson

I do believe that one of the reasons that product category does not improve is because we have less competition with Payless being gone. However, I think it is really important that I give credit to the merchant team who reacted to the fact that Payless was no longer around, but by beefing up our women’s dress shoe area and our women’s casual area so that the customers that have them buying that product from Payless know that they could get it from Shoe Carnival.

Christopher Svezia

Okay, got it. And I want to go to stores and store openings after April 2. I know you mentioned that you are sort of watching what the CDC has to say and the government. Would you do anything local by local market depending on what those local agencies, those states are indicating as to whether or not you can open up stores, what would you just think nationally if also as the [indiscernible] service grows or where would you go state-by-state depending on what’s going on, just tell us how you think about that flexibility when you step into the post April 2nd ?

Clifton Sifford

I will tell you that the states or local communities would give the go ahead to open retail, our stores will be open. Okay, so that might be the only forward-looking statement I am going to give. But we are ready, willing and able to open our stores when we are given the go ahead by any government agency.

Kerry Jackson

Chris, Kerry here. First is going to be the health and safety of our employees and our customers and when we perceive it to be safe, that’s when we could look it on a regional basis if there are different levels of safety across the country.

Christopher Svezia

Got it, okay, that’s helpful. E-commerce just so I understand, something 8% of sales, what are the margin dynamics look like now on that segment of business are they comparable to the corporate average, where does that stand right now?

Mark Worden

Hey Chris, we’re very pleased to say they are still comparable with where the profitability was throughout the fiscal year and comparable, I think it is down to the bottom line profitability with the less of our business roughly.

Christopher Svezia

Okay, thank you Mark. And is it fair to say that in facts you’re doing and seeing acceleration, triple digit increases does that improve the leveragability and profitability of that segment as you go through this period?

Mark Worden

We believe it has – we are building this as we move toward our mission objections to grow from below 8% last year to above 10% of company revenue, we will continue to get some leverage and we believe we will be able to translate that into higher profitability through those transactions.

Christopher Svezia

Got it. SG&A, Cliff you mentioned you are looking at expenses, you are looking at CapEx, I guess what are you looking at, I don’t know Kerry if you gave the CapEx number if that’s I think your guess for 2020 guidance and you don’t, but just curious where you’re looking in SG&A expense savings, any color about that you can provide on CapEx?

Kerry Jackson

Chris, like we said at the beginning of the call, we’re not going to be able to provide any guidance on 2020 on how we’re operating within this environment, how we’re looking at SG&A, we won’t be able to answer that question.

Christopher Svezia

Okay. Last thing I guess I got is, you reference $57 million in cash as of, I don’t remember the exact date and you said the $59 million on the revolver, you haven’t drawn anything on the revolver at this point, correct?

Clifton Sifford

We have not drawn anything on the revolver at the end of the year and we’re not able to update you on that. I guess we gave you a number of cash on hand at the end of our fiscal February. At that point in time we could say we didn’t have any borrowings on that, because we had significant cash obviously on hand at that point in time.

Christopher Svezia

Okay, got it. Okay, that’s all I got. All the best to your guys, I appreciate it.

Clifton Sifford

Thank you, Chris.

Operator

And we will take our next question from Mitch Kummetz with Pivotal Research.

Mitch Kummetz

Thanks. I’ve got a few more, so on the digital, I hope this is fair game because you guys said in your prepared remarks that digital was up triple digits of late. I’m just curious, do you think that’s a natural migration as the stores were closed or is that a function of certain strategies that you guys have employed? And then in addition to that, I guess we’re on the same line, how are you leveraging those 23 million Shoe Perks members in order to encourage traffic and conversion, could you maybe speak to some of the strategies and how you think those will work?

Mark Worden

Sure, hi it’s Mark. It is both. There is a natural consumer shift now that our store base is closed. So we are also shifting our marketing investments to accelerating new traffic in new ways to come into our online channel. And it is really the CRM program and the knowledge that we have gained about our 23 million plus members we’re able to tap into that in moments like these times and try to leverage in ways with high profitability and high effectiveness we’ve seen over these first seven days and this far in our marketplace. We’re really pleased with the response we’ve seen.

Like I said we’re seeing triple digit increase in order and we’re seen an acceleration. And as we learn more and more through our rich analytics were are continuing to invest to bring more and more of those consumers into our bags. So we are very pleased with how our teams are responding, how they are rapidly getting new vehicles out there to consumers and how we’re able to satisfy some of the demand in the marketplace during these unprecedented times.

Mitch Kummetz

And then you also mentioned that you guys were fulfilling from stores where you were able to do that, can you may be just sort of walk though the strategy behind that is the reasoning you are doing that so just going of a DC and is there a certain number of stores within certain regions that you’ve kept open with some people and staff in order to do this?

Mark Worden

Sure, out ongoing e-commerce fulfillment strategy has been utilized in our store base. So we still believe that is the most effective way to have our inventory ready to be purchased in our 392 stores or fulfilled to the constituents closest to those respective stores both from a supply chain effectiveness and cost efficiency. So in this moment, where government officials are allowing us to we’re continuing to use our stores to fulfill e-commerce orders.

In addition, we are using our DC so that we’ve got dual capabilities to fulfill both from a distribution center as more stores will close as well as from around the country when work governors are allowing us to local [indiscernible].

Clifton Sifford

You know Mitch, yes I can add to that, you know a lot of the states the governors have come out and said that the stores have to be closed. However, fulfillment and that’s a key word, fulfillment can still take place as long as you are recognizing the six separation.

Mitch Kummetz

Got it. And then a followup to one of Sam’s questions, he was asking about e-commerce percentage, you guys said it was 8% for the year. I get it that it is higher in Q4 because of the holiday, but can you see what it is and what it was in Q1 last year? I assume it was under the 8%.

Kerry Jackson

We’re not currently breaking out our e-commerce results and there is the first for us to share our aggregate numbers, but again, we’re really delighted to get it to climb over 8% and we feel a run rate despite what is currently going on, our strategic plan will help us get north of 10% in the next one to two years despite the acceleration we’re going to naturally get right now.

Mitch Kummetz

Okay. I’ve got a couple more. One, is there any way you guys could characterize what percent of your Q1 inventory is seasonal? I know it’s bigger in Q2 than Q1, but just you know, and whether you just call it sandal seasonal or if there are other things that you consider to be seasonal?

Clifton Sifford

You know Mitch, we’re not going to address anything related to our inventory positions that we currently have.

Mitch Kummetz

Okay, and then last one maybe for you Kerry. I know that rent and store payroll to your bigger SG&A line items, can you maybe address some of the other ones, like T&E [ph] or marketing, other line items on the SG&A side, just sort of frame them and are they – is marketing a few hundred basis points, is percent of sales, is T&E [ph] any just give some sense as to – because those are some of the line items that you would maybe have the most flexibility to trim?

Kerry Jackson

You know, we’re not going to, like I said we’re not going to give the 2020 guidance and even historical numbers we won’t get into that level of detail aside from our business like that. So I am not going to be able to address that question directly.

Mitch Kummetz

Can you see where marketing? I don’t know if you have given marketing before, but that’s kind of a number that a lot of people do give?

Kerry Jackson

Typically [indiscernible] We run approximately about 4% of sales, some years low higher, some years a little bit lower but generally it is around 4%.

Mitch Kummetz

Okay, great. I appreciate that. Thanks guys, good luck.

Kerry Jackson

Thank you.

Clifton Sifford

Thank you.

Operator

We do have a followup question from Sam Poser.

Sam Poser

Oh, hi. Thank you. I’m going to sort of align with Mitch. I understand that you are very pleased with your e-commerce business and how it is going. However, and normally you don’t talk about a lot of things. And since you are not giving us guidance, these are extraordinary times. So that being said we recognize your e-commerce business is really good and growing, but as a percent of sales in Q1 2019 what was the e-commerce as a percent of sales, so we have a framework. So we cannot put up totally ridiculous numbers with our 1Q estimates we will do. Thank you.

Kerry Jackson

Sam, we’re not going to give the exact number. If we were 8% for the full year and we have a higher percent in Q4, so Q1 was under the average. So you see that Q1, 2, and 3 were under the average as a percent and Q4 will be over the average as a percent.

Sam Poser

How much of that is current?

Kerry Jackson

[Indiscernible] Q4 over half.

Sam Poser

How much was Q4 over? I mean was it over, it has to overall a lot, I mean was it like 12 and then everything else was 6 or 7? Is that directionally correct?

Kerry Jackson

We aren’t going to break down the specifics at this time. I’ll just have to leave it at that, but we do have – we have cyber Monday and holiday sales. E-commerce is very strong in the fourth quarter and so that’s what drives it as a higher percent of the overall. We see Q1, Q2, and Q3 be a more consistent percent of the total.

Sam Poser

So I think Mitch and I would arguably say the source is taken care of, so thank you and success and throughout all this situation.

Clifton Sifford

Thank you, Sam.

Operator

And at this time I am showing no further questions. I will now turn it back to our presenters for closing remarks.

Clifton Sifford

I want to thank you for participating in our conference call and your continued interest in Shoe Carnival. We do look forward to taking to you again in May as we report our first quarter results.

Operator

Ladies and gentlemen, this concludes today’s call. Thank you for your participation and you may now disconnect your phone lines.

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