SHOE STATION GROUP INC

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PART I, ITEM 1 of this Quarterly Report, as well as our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 as filed with the SEC. This section of this Quarterly Report generally discusses our results for first quarter 2026 and first quarter 2025 and year-over-year comparisons between first quarter 2026 and first quarter 2025.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information to assist the reader in better understanding and evaluating our financial condition and results of operations. We encourage you to read this in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in PART I, ITEM 1 of this Quarterly Report, as well as our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 as filed with the SEC. This section of this Quarterly Report generally discusses our results for second quarter 2026 and second quarter 2025 as well as year-to-date results for, and comparisons between, the two periods.

Previous wording

Referred to herein, first quarter 2026 is the thirteen weeks ended May 2, 2026, first quarter 2025 is the thirteen weeks ended May 3, 2025 and Fiscal 2026 is the fiscal year ending January 30, 2027.

Current wording

As referred to herein, second quarter 2026 is the thirteen weeks ended August 1, 2026, first quarter 2026 is the thirteen weeks ended May 2, 2026 and second quarter 2025 is the thirteen weeks ended August 2, 2025. Also as referred to herein, year-to-date 2026 is the twenty-six weeks ended August 1, 2026 and year-to-date 2025 is the twenty-six weeks ended August 2, 2025. Fiscal 2026 is the fiscal year ending January 30, 2027.

Previous wording

Shoe Carnival, Inc. is one of the nation’s largest omnichannel sellers of footwear for the family, and our goal is to be the leading family footwear retailer in the United States. Our product assortment, whether shopping in a physical store or through our e-commerce sales channel, is primarily branded footwear and includes dress and casual shoes, sandals, boots, work shoes, and a wide assortment of athletic shoes. We carry shoes in two general categories – athletics and non-athletics with subcategories for men’s, women’s and children’s and we also carry certain accessories. In addition to our physical stores, through our e-commerce sales channel, customers can purchase the same assortment of merchandise in all categories of footwear with expanded options in certain instances. We operate under two banners: Shoe Carnival and Shoe Station. As of May 2, 2026, we operated 426 stores across 35 states and Puerto Rico, consisting of 145 Shoe Station locations and 281 Shoe Carnival locations.

Current wording

Shoe Station Group, Inc. (formerly known as Shoe Carnival, Inc.) is one of the nation’s largest omnichannel sellers of footwear for the family, and our goal is to be the leading family footwear retailer in the United States. Our product assortment, whether shopping in a physical store or through our e-commerce sales channel, is primarily branded footwear and includes dress and casual shoes, sandals, boots, work shoes, and a wide assortment of athletic shoes. We carry shoes in two general categories – athletics and non-athletics with subcategories for men’s, women’s and children’s and we also carry certain accessories. In addition to our physical stores, through our e-commerce sales channel, customers can purchase the same assortment of merchandise in all categories of footwear with expanded options in certain instances. We operate under two banners: Shoe Carnival and Shoe Station. As of August 1, 2026, we operated 422 stores across 35 states and Puerto Rico, consisting of 165 Shoe Station locations and 257 Shoe Carnival locations.

Previous wording

On November 13, 2025, we announced that our Board unanimously approved changing our corporate name to Shoe Station Group, Inc., subject to shareholder approval at our Annual Meeting of Shareholders on June 10, 2026.

Current wording

On November 13, 2025, we announced that our Board unanimously approved changing our corporate name to Shoe Station Group, Inc., which received shareholder approval at our Annual Meeting of Shareholders on June 10, 2026. The name change was effective June 12, 2026. In connection with the name change, our common stock began trading on The Nasdaq Stock Market LLC under the symbol SHOE.

Previous wording

Our Shoe Carnival retail concept has developed over our 47-year history and is differentiated from our competitors by our distinctive, fun and promotional marketing efforts. Shoe Carnival stores combine competitive pricing with a high-energy in-store environment that encourages customer participation. Unique features of our Shoe Carnival store experience include upbeat music, opportunities for customers to spin our spin-n-win wheel and a mic-person who runs in-store specials. These specials include contests, games and hot deals of the moment to encourage customers to take immediate advantage of our special, in-store pricing. Our Shoe Carnival bannered stores serve families with children through moderate-income brands and a value-oriented selection, with entry-level price points.

Current wording

Our Shoe Carnival banner has developed over our 47-year history and is differentiated from our competitors by our distinctive, fun and promotional marketing efforts. Shoe Carnival stores combine competitive pricing with a high-energy in-store environment that encourages customer participation. Unique features of our Shoe Carnival store experience include upbeat music, opportunities for customers to spin our spin-n-win wheel and a mic-person who runs in-store specials. These specials include contests, games and hot deals of the moment to encourage customers to take immediate advantage of our special, in-store pricing. Our Shoe Carnival bannered stores serve families with children through moderate-income brands and a value-oriented selection, with entry-level price points.

Previous wording

The Shoe Station banner and retail locations, which includes stores co-branded as “Shoe Station at Rogan’s” and business-to-business operations branded as “Rogan’s Work”, serve a broader base of footwear customers. Our Shoe Station concept targets a more affluent footwear customer than our Shoe Carnival banner and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands that meet the needs of the target customer. Shoe Station serves this demographic through a differentiated assortment of premium brands and an enhanced in-store experience.

Current wording

Our Shoe Station banner, which includes stores co-branded as “Shoe Station at Rogan’s” and business-to-business operations branded as “Rogan’s Work”, serves a broader base of footwear customers. Our Shoe Station concept targets a more affluent footwear customer than our Shoe Carnival banner and has a strong track record of capitalizing on emerging footwear fashion trends and introducing new brands that meet the needs of the target customer. Shoe Station serves this demographic through a differentiated assortment of premium brands and an enhanced in-store experience.

Previous wording

Mr. Worden’s departure was treated as a termination without cause pursuant to his Amended and Restated Employment and Noncompetition Agreement, dated as of November 1, 2024. Payments to Mr. Worden included 168,184 shares of our common stock for the settlement of outstanding equity awards whose vesting accelerated upon his termination without cause and a cash payment of $4.8 million. Payments to Mr. Worden and other related costs incurred, net of accruals for incentive and stock-based compensation as of January 31, 2026, resulted in a charge of $5.3 million in first quarter 2026. The tax deductibility of the payments made to Mr. Worden was limited by the Internal Revenue Code and increased our income tax expense by approximately $1.6 million. The impact on our Diluted Net Loss per Share in first quarter 2026 was $0.20.

Current wording

In connection with the CEO transition, payments to Mr. Worden and other related costs incurred, net of accruals for incentive and stock-based compensation as of January 31, 2026, resulted in a charge of $5.3 million in first quarter 2026. The tax deductibility of the payments made to Mr. Worden was limited by the Internal Revenue Code and increased our income tax expense by approximately $1.6 million. The impact of these payments made to Mr. Worden on our Diluted Net Loss per Share during first quarter 2026 was $0.20.

Previous wording

While our proposed corporate name change to Shoe Station Group, Inc. reflects the Board’s conviction that the Shoe Station concept is our primary long-term growth vehicle, we are no longer pursuing a single-banner Shoe Station strategy. The Shoe Carnival and Shoe Station banners will each serve distinct consumer segments, and we believe the Company is best positioned to operate both banners as permanent, independent components of our portfolio.

Current wording

While our corporate name change to Shoe Station Group, Inc. reflects the Board’s conviction that the Shoe Station concept is our primary long-term growth vehicle, we are no longer pursuing a single-banner Shoe Station strategy. The Shoe Carnival and Shoe Station banners will each serve distinct consumer segments, and we believe the Company is best positioned to operate both banners as permanent, independent components of our portfolio.

Previous wording

Only a limited number of additional Shoe Carnival locations meet the criteria for conversion to our Shoe Station banner. However, we continue to feel confident about growth opportunities for the Shoe Station banner through new store growth in markets that serve the target customer.

Current wording

Only a limited number of additional Shoe Carnival locations meet the criteria for conversion to our Shoe Station banner. However, we continue to feel confident about growth opportunities for the Shoe Station banner through new store growth in markets that serve the target customer. No additional rebanners are expected for the remainder of Fiscal 2026.

Previous wording

There are underperforming stores within our store fleet that we do not believe have a path to acceptable economics, with or without banner conversion. We expect to close 12 to 14 such stores during Fiscal 2026 and a further six to 10 stores during Fiscal 2027.

Current wording

There are underperforming stores within our store fleet that we do not believe have a path to acceptable economics, with or without banner conversion. Four such stores have been closed in year-to-date 2026, and we expect to close eight to 10 additional stores during the third and fourth quarters of Fiscal 2026 and a further six to 10 stores during Fiscal 2027.

Previous wording

When combined with the CEO transition costs discussed above, these charges increased our Selling, General and Administrative Expenses (“SG&A”) in first quarter 2026 by $13.6 million and increased our Net Loss and Diluted Net Loss per Share by $11.9 million and $0.43, respectively.

Current wording

When combined with the CEO transition costs discussed above, these charges increased our Selling, General and Administrative Expenses (“SG&A”) in first quarter 2026 by $13.6 million and increased our Net Loss and Diluted Net Loss per Share by $11.9 million and $0.43, respectively. No additional charges related to the CEO transition and strategic review were recorded in second quarter 2026.

Previous wording

Executive Summary for First Quarter Ended May 2, 2026

Current wording

Executive Summary for Second Quarter Ended August 1, 2026

Previous wording

As impacted by the first quarter 2026 charges of $13.6 million ($11.9 million after tax or $0.43 per diluted share) discussed above involving CEO transition and related strategy review, our first quarter 2026 Net Loss was $(5.6) million, or $(0.21) per diluted share compared to Net Income of $9.3 million, or $0.34 per diluted share, reported in first quarter 2025. Our operating results in first quarter 2026 otherwise declined $0.11 compared to first quarter 2025 on lower Net Sales and lower gross profit margin.

Current wording

Second quarter 2026 Net Income was $6.3 million, or $0.23 per diluted share compared to Net Income of $19.2 million, or $0.70 per diluted share, reported in second quarter 2025. Diluted Net Income per Share in second quarter 2026 declined $0.47 compared to second quarter 2025 on lower Net Sales and a lower gross profit margin.

Previous wording

Our Net Sales declined 2.5% in first quarter 2026 compared to first quarter 2025, primarily due to a 2.1% decline in comparable store Net Sales, driven by a decrease in units sold. For each respective banner:

Current wording

Our Net Sales declined 7.2% in second quarter 2026 compared to second quarter 2025, primarily due to a 7.1% decline in comparable store Net Sales, inclusive of a 4% decrease in units sold. For each respective banner:

Previous wording

Shoe Carnival Net Sales were $177.3 million, representing 65% of total Net Sales, and declined 2.2%, inclusive of a comparable store Net Sales decline of 1.7%. This was an improvement compared to mid-to-high single digit quarterly declines throughout Fiscal 2025.

Current wording

Shoe Carnival Net Sales were $178.5 million, representing 63% of total Net Sales, and declined 6.5%, inclusive of a comparable store Net Sales decline of 6.3%.

Previous wording

Shoe Station Net Sales were $93.4 million, representing 35% of total Net Sales, and declined 3.1%, inclusive of a comparable store Net Sales decline of 2.9%. Improved trends in rebanner store net sales were more than offset by slower growth from the Shoe Station e-commerce sales channel.

Current wording

Shoe Station Net Sales were $105.7 million, representing 37% of total Net Sales, and declined 8.4%, inclusive of a comparable store Net Sales decline of 8.5%.

Previous wording

Our Gross Profit margin of 33.3% in first quarter 2026 decreased 120 basis points from first quarter 2025. The decrease included a 140 basis point decrease in our merchandise margin, driven by the expected increase in promotional activity, higher merchandise cost, and higher e-commerce-related shipping costs. This more than offset 20 basis points gained from primarily lower buying, distribution and occupancy costs. As a result of our lower Net Sales and lower gross profit margin, our Gross Profit declined to $90.1 million in first quarter 2026 compared to $95.8 million in first quarter 2025.

Current wording

As a result of our lower Net Sales and lower gross profit margin, our Gross Profit declined to $90.6 million in second quarter 2026 compared to $118.8 million in second quarter 2025.

Previous wording

Our Merchandise Inventories at the end of first quarter 2026 were $417.2 million, down $11.2 million, or 2.6%, compared to the end of first quarter 2025. We anticipate aggregate declines in Merchandise Inventories in a range of $50 to $65 million by the end of Fiscal 2026 compared to the end of Fiscal 2025 as we expect to sell the remaining opportunistic pre-tariff and in-demand product purchased in Fiscal 2025 and increase promotional activity to work through excess inventory not part of our ongoing assortment, including legacy Shoe Carnival inventory, that will no longer be required as a result of rebannering. The promotional activity necessary to sell this inventory is expected to reduce gross profit margins in Fiscal 2026 compared to the 36.6% gross profit margin achieved in Fiscal 2025. Our first quarter 2026 gross profit margin declined 120 basis points compared to first quarter 2025.

Current wording

Our Merchandise Inventories at the end of second quarter 2026 were $426.6 million, down $22.4 million, or 5.0%, compared to the end of second quarter 2025. We anticipate an aggregate decline in Merchandise Inventories of approximately $50 million by the end of Fiscal 2026 compared to the end of Fiscal 2025. This anticipated decline is the result of continuing to sell through opportunistic pre-tariff and in-demand product purchased in Fiscal 2025 and working through inventory not part of our ongoing assortment. The promotional activity necessary to sell this inventory has reduced, and is expected to continue to reduce, gross profit margin in Fiscal 2026 compared to the 36.6% gross profit margin achieved in Fiscal 2025.

Previous wording

The Fiscal 2025 year-end marked the 21st consecutive year where we ended a fiscal year with no debt, fully funding our operations, acquisitions and investments from operating cash flow and cash reserves. Through first quarter 2026, we also funded our operations without incurring any debt and grew our Cash, Cash Equivalents and Marketable Securities by $36.4 million, or 39.2%, compared to the end of first quarter 2025. At the end of first quarter 2026, we had $129.3 million of Cash, Cash Equivalents and Marketable Securities and $99.0 million of available borrowings under our existing credit facility to fund our growth objectives, including new store openings expected in Fiscal 2027 and strategic acquisitions of other footwear retailers. Cash Flow from Operations increased $32.7 million compared to first quarter 2025 while Capital Expenditures declined $2.9 million.

Current wording

The Fiscal 2025 year-end marked the 21st consecutive year where we ended a fiscal year with no debt, fully funding our operations, acquisitions and investments from operating cash flow and cash reserves. Through second quarter 2026, we also funded our operations without incurring any debt and grew our Cash, Cash Equivalents and Marketable Securities by $39.7 million, or 43.2%, compared to the end of second quarter 2025. At the end of second quarter 2026, we had $131.6 million of Cash, Cash Equivalents and Marketable

Previous wording

Results of Operations for First Quarter Ended May 2, 2026 Compared to First Quarter Ended May 3, 2025

Current wording

Results of Operations for Second Quarter Ended August 1, 2026 Compared to Second Quarter Ended August 2, 2025

Previous wording

Net Sales were $270.7 million during first quarter 2026, a decrease of $7.0 million, or 2.5%, compared to first quarter 2025. The decrease was primarily due to a 2.1% decline in our comparable store Net Sales, which included an approximate 6% decrease in units sold, partially offset by price increases. Our Shoe Carnival banner comparable store Net Sales declined 1.7%, and our Shoe Station banner comparable store Net Sales declined 2.9%. E-commerce sales were approximately 10% of merchandise sales in first quarter 2026, compared to 9% in first quarter 2025.

Current wording

Net Sales were $555.0 million during year-to-date 2026, a decrease of $29.1 million, or 5.0%, compared to year-to-date 2025. The decrease was primarily due to a 4.7% decline in our comparable store Net Sales, primarily due to lower sales volume. Our Shoe Carnival banner comparable store Net Sales declined 4.0%, and our Shoe Station banner comparable store Net Sales declined 5.8%. E-commerce sales were approximately 10% of merchandise sales in year-to-date 2026, compared to 9% in year-to-date 2025.

Previous wording

Gross Profit was $90.1 million during first quarter 2026, a decrease of $5.7 million compared to first quarter 2025. Gross profit margin in first quarter 2026 was 33.3%, a decrease of 120 basis points, compared to 34.5% in first quarter 2025. The decrease in gross profit margin resulted from a 140 basis point decrease in merchandise margin driven by increased promotional activity, higher merchandise cost, and higher e-commerce-related shipping costs. This decrease was partially offset by 20 basis points from primarily lower buying, distribution and occupancy costs.

Current wording

Gross Profit was $180.7 million during year-to-date 2026, a decrease of $33.9 million compared to year-to-date 2025. Gross profit margin in year-to-date 2026 was 32.6%, a decrease of 410 basis points, compared to 36.7% in year-to-date 2025. The decrease in gross profit margin resulted from a 390 basis point decrease in merchandise margin driven primarily by higher merchandise cost. Buying, distribution and occupancy costs decreased gross profit margin 20 basis points primarily due to the deleveraging effect of lower Net Sales.

Previous wording

Income tax expense in the first quarter of 2026 was $0.6 million and was impacted by nondeductible CEO severance payments that increased income tax expense by approximately $1.6 million. Our effective tax rate in the first quarter of 2026 was (11.2)% compared to 28.1% in the first quarter of 2025. Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events.

Current wording

The effective income tax rate for year-to-date 2026 was 81.8% compared to 26.6% for year-to-date 2025. The higher effective tax rate in year-to-date 2026 compared to year-to-date 2025 was impacted by nondeductible CEO severance payments that increased income tax expense by approximately $1.6 million and the impact of other discrete adjustments related to share-settled equity awards. Our provision for income taxes is based on the current estimate of our annual effective tax rate and is adjusted as necessary for quarterly events. We anticipate an effective tax rate for Fiscal 2026 of approximately 37%.

Previous wording

Our primary sources of liquidity are $129.3 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of first quarter 2026, cash generated from operations and availability under our $100 million Credit Agreement. We believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are normally for our working capital needs, which are principally inventory purchases, investments in our stores and distribution center, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program and the financing of other capital projects, including investments in new systems and technology. As part of our growth strategy, we have also pursued, from time to time, strategic acquisitions of other footwear retailers.

Current wording

Our primary sources of liquidity are $131.6 million of Cash, Cash Equivalents and Marketable Securities on hand at the end of second quarter 2026, cash generated from operations and availability under our $100 million Credit Agreement. We believe our resources will be sufficient to fund our cash needs, as they arise, for at least the next 12 months. Our primary uses of cash are normally for our working capital needs, which are principally inventory purchases, investments in our stores and distribution center, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program and the financing of other capital projects, including investments in new systems and technology. As part of our growth strategy, we have also pursued, from time to time, strategic acquisitions of other footwear retailers.

Previous wording

Net cash generated from operating activities was $23.1 million in first quarter 2026 compared to net cash used in operating activities of $9.6 million in first quarter 2025. The increase in operating cash flow was primarily driven by decreased inventory purchases, partially offset by lower earnings.

Current wording

Net cash generated from operating activities was $34.1 million in year-to-date 2026 compared to $3.6 million in year-to-date 2025. The increase in operating cash flow resulted primarily from decreased inventory purchases, partially offset by lower earnings.

Previous wording

Working capital increased on a year-over-year basis and totaled $429.0 million at May 2, 2026 compared to $399.0 million at May 3, 2025. The increase was primarily attributable to a higher cash balance coupled with lower payables and accrued liabilities, partially offset by lower Merchandise Inventories. Our current ratio was 4.0 as of May 2, 2026 compared to 3.7 as of May 3, 2025.

Current wording

Working capital increased on a year-over-year basis and totaled $444.6 million at August 1, 2026 compared to $417.6 million at August 2, 2025. The increase was primarily attributable to higher Cash and Cash Equivalents, coupled with lower Accrued and Other Liabilities and a lower Current Portion of Operating Lease Liabilities, partially offset by lower Merchandise Inventories. Our current ratio was 4.0 as of August 1, 2026 compared to 3.7 as of August 2, 2025.

Previous wording

Our cash outflows for investing activities are normally for capital expenditures. During first quarters 2026 and 2025, we expended $10.4 million and $13.3 million, respectively, for the purchase of Property and Equipment, primarily related to our stores.

Current wording

Our cash outflows for investing activities are normally for capital expenditures. During year-to-date 2026 and 2025, we expended $15.0 million and $24.4 million, respectively, for the purchase of Property and Equipment, primarily related to our stores.

Previous wording

We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our non-qualified deferred compensation plan. The balance of these Marketable Securities was $13.2 million at May 2, 2026, compared to $13.6 million at January 31, 2026 and $14.5 million at May 3, 2025. Additional information can be found in Note 5 — “Fair Value Measurements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

Current wording

We invest in publicly traded mutual funds designed to mitigate income statement volatility associated with our non-qualified deferred compensation plan. The balance of these Marketable Securities was $13.6 million at August 1, 2026, compared to $13.6 million at January 31, 2026 and $13.2 million at August 2, 2025. Additional information can be found in Note 5 — “Fair Value Measurements” to our Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.

Previous wording

During first quarter 2026, net cash used in financing activities was $14.2 million compared to $6.5 million during first quarter 2025. The increase in net cash used in financing activities was primarily due to shares repurchased under our Board of Directors’ authorized share repurchase program, increased dividend payments, and an increase in shares surrendered by employees to pay taxes on stock-based compensation awards.

Current wording

During year-to-date 2026, net cash used in financing activities was $18.8 million compared to $10.6 million during year-to-date 2025. The increase in net cash used in financing activities was primarily due to shares repurchased under our Board of Directors’ authorized share repurchase program and increased dividend payments.

Previous wording

On March 23, 2022, we entered into a $100 million Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement is collateralized by our inventory, expires on March 23, 2027, and uses a Secured Overnight Financing Rate (“SOFR”) as quoted by The Federal Reserve Bank of New York as the basis for financing charges. Material covenants associated with the Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0. We were in compliance with these covenants as of May 2, 2026.

Current wording

On March 23, 2022, we entered into a $100 million Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement is collateralized by our inventory, expires on March 23, 2027, and uses a Secured Overnight Financing Rate (“SOFR”) as quoted by The Federal Reserve Bank of New York as the basis for financing charges. Material covenants associated with the Credit Agreement require that we maintain a minimum net worth of $250 million and a consolidated interest coverage ratio of not less than 3.0 to 1.0. We were in compliance with these covenants as of August 1, 2026. We expect to renew or replace our Credit Agreement in the second half of Fiscal 2026.

Previous wording

The Credit Agreement bears interest, at our option, at (1) the agent bank’s base rate plus 0.0% to 1.0% or (2) Adjusted Term SOFR plus 0.9% to 1.9%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment. During first quarter 2026, we did not borrow or repay funds under the Credit Agreement. Letters of credit outstanding were $1.0 million at May 2, 2026 and our borrowing capacity was $99.0 million.

Current wording

The Credit Agreement bears interest, at our option, at (1) the agent bank’s base rate plus 0.0% to 1.0% or (2) Adjusted Term SOFR plus 0.9% to 1.9%, depending on our achievement of certain performance criteria. A commitment fee is charged at 0.2% to 0.3% per annum, depending on our achievement of certain performance criteria, on the unused portion of the lenders’ commitment. During year-to-date 2026, we did not borrow or repay funds under the Credit Agreement. Letters of credit outstanding were $1.0 million at August 1, 2026 and our borrowing capacity was $99.0 million.

Previous wording

We had 426 stores at the end of first quarter 2026. The strategic review of our store portfolio performed in first quarter 2026 confirmed a permanent two-banner operating model. We rebannered one Shoe Carnival store into a Shoe Station store in the first quarter 2026 and will rebanner 20 additional Shoe Carnival stores into Shoe Station stores in second quarter 2026. CRM analysis and store-level trade area analysis identified only a limited number of other stores for future conversion to Shoe Station. No additional rebanners are planned for the third and fourth quarters of 2026. No stores were opened or permanently closed in first quarter 2026.

Current wording

We had 422 stores at the end of second quarter 2026. The strategic review of our store portfolio completed in first quarter 2026 confirmed a permanent two-banner operating model. In year-to-date 2026, we rebannered 21 Shoe Carnival stores into Shoe Station stores, 20 of which were completed in second quarter 2026. CRM analysis and store-level trade area analysis identified only a limited number of other stores for future conversion to Shoe Station. No additional rebanners are planned for the third and fourth quarters of 2026. No stores were opened and four stores were permanently closed in year-to-date 2026, of which all four were closed in second quarter 2026.

Previous wording

We expect to close 12 to 14 underperforming stores during Fiscal 2026 and six to 10 stores during Fiscal 2027.

Current wording

We expect to close eight to 10 additional underperforming stores during the third and fourth quarters of Fiscal 2026 and six to 10 stores during Fiscal 2027.

Previous wording

Capital expenditures for Fiscal 2026 are expected to be between $15 million and $20 million, inclusive of $6 million to $8 million related to rebanner activity. The resources allocated to projects are subject to near-term changes depending on potential inflationary, supply chain and other macroeconomic impacts. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, rebannered, relocated and remodeled, and the amount of lease incentives, if any, received from landlords. The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.

Current wording

Capital expenditures for Fiscal 2026 are expected to be between $17 million and $20 million. The resources allocated to projects are subject to near-term changes depending on potential inflationary, supply chain and other macroeconomic impacts. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, rebannered, relocated and remodeled, and the amount of lease incentives, if any, received from landlords. The number of new store openings and relocations will be dependent upon, among other things, the availability of desirable locations, the negotiation of acceptable lease terms and general economic and business conditions affecting consumer spending.

Previous wording

On March 3, 2026, the Board of Directors approved a 13.3% increase in our cash dividend paid to our shareholders in first quarter 2026. The quarterly cash dividend of $0.17 per share was paid on April 20, 2026 to shareholders of record as of the close of business on April 6, 2026. In first quarter 2025, the dividend paid was $0.15 per share. During first quarters 2026 and 2025, we returned $5.0 million and $4.4 million, respectively, to our shareholders through our quarterly cash dividends. The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.

Current wording

On June 10, 2026, the Board of Directors approved the payment of a second quarter cash dividend to our shareholders. The quarterly cash dividend of $0.17 per share was paid on July 20, 2026 to shareholders of record as of the close of business on July 6, 2026. In second quarter 2025, the dividend paid was $0.15 per share. During year-to-date 2026 and 2025, we returned $9.6 million and $8.5 million, respectively, to our shareholders through our quarterly cash dividends. The declaration and payment of any future dividends are at the discretion of the Board of Directors and will depend on our results of operations, financial condition, business conditions and other factors deemed relevant by our Board of Directors.

Previous wording

During first quarter 2026, we repurchased 390,492 shares of common stock at a total cost of $7.0 million under the 2026 Share Repurchase Program. As of May 2, 2026, we had $43.0 million available for future repurchases. No share repurchases were made during first quarter 2025.

Current wording

During year-to-date 2026, we repurchased 390,492 shares of common stock at a total cost of $7.0 million under the 2026 Share Repurchase Program. As of August 1, 2026, we had $43.0 million available for future repurchases. No share repurchases were made during year-to-date 2025.

Previous wording

Our Credit Agreement permits the payment of dividends and repurchase of shares, subject to certain covenants and restrictions. See “Credit Agreement” above and Note 10 - “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 for a further discussion of the Credit Agreement, its covenants and restrictions regarding dividends and share repurchases and other matters. The Credit Agreement’s covenants and restrictions did not change during first quarter 2026.

Current wording

Our Credit Agreement permits the payment of dividends and repurchase of shares, subject to certain covenants and restrictions. See “Credit Agreement” above and Note 10 - “Debt” to our Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 for a further discussion of the Credit Agreement, its covenants and restrictions regarding dividends and share repurchases and other matters. The Credit Agreement’s covenants and restrictions did not change during second quarter 2026.

Previous wording

In February 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed by the United States executive branch under the International Emergency Economic Powers Act (“IEEPA”). The United States executive branch subsequently instituted additional tariffs under other laws. These actions have resulted in considerable uncertainty regarding the scope and duration of current and potential tariffs and the impact this uncertainty may have on us, including availability and timing of refunds of tariffs paid under IEEPA. We continue to monitor and evaluate tariff policy and assess the potential impact on our business, financial condition, and results of operations. At this time, we cannot reasonably estimate the total financial impact of these events; however, these actions, and any additional tariffs imposed, may materially affect our future results of operations and cash flows.

Current wording

In February 2026, the United States Supreme Court issued a ruling striking down certain tariffs previously imposed by the United States executive branch under the International Emergency Economic Powers Act (“IEEPA”). The United States executive branch subsequently instituted additional tariffs under other laws. These actions have resulted in considerable uncertainty regarding the scope and duration of current and potential tariffs and the impact this uncertainty may have on us, including availability and timing of refunds of tariffs paid under IEEPA. We continue to monitor and evaluate tariff policy and assess the potential impact on our business, financial condition, and results of operations. At this time, we cannot reasonably estimate the total financial impact of these events; however, these actions, and any additional tariffs imposed, may materially affect our future results of operations and cash flows. We submitted initial refund claims in July 2026 and expect to file additional claims in the second half of Fiscal 2026. We will record any refunds when collected. We expect refunds for these initial claims and expected future claims to approximate $1.2 million.