SHOE CARNIVAL, INC. Factors That May Affect Future Results
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to: the duration and spread of the COVID-19 pandemic, mitigating efforts deployed, including the effects of government stimulus on consumer spending, and the pandemic's overall impact on our operations, including our stores, supply chain and distribution processes, economic conditions, and financial market volatility; general economic conditions in the areas of the continentalUnited States andPuerto Rico where our stores are located; the effects and duration of economic downturns and unemployment rates; changes in the overall retail environment and more specifically in the apparel and footwear retail sectors; our ability to generate increased sales; our ability to successfully navigate the increasing use of online retailers for fashion purchases and the impact on traffic and transactions in our physical stores; the success of the open-air shopping centers where our stores are located and its impact on our ability to attract customers to our stores; our ability to attract customers to our e-commerce platform and to successfully grow our omnichannel sales; the potential impact of national and international security concerns on the retail environment; the effectiveness of our inventory management, including our ability to manage key merchandise vendor relationships and emerging direct-to-consumer initiatives; changes in our relationships with other key suppliers; our ability to control costs and meet our labor needs in a rising wage and/or inflationary environment; changes in the political and economic environments in, the status of trade relations with, and the impact of changes in trade policies and tariffs impacting,China and other countries which are the major manufacturers of footwear; the impact of competition and pricing; our ability to successfully manage and execute our marketing initiatives and maintain positive brand perception and recognition; our ability to successfully manage our current real estate portfolio and leasing obligations; changes in weather, including patterns impacted by climate change; changes in consumer buying trends and our ability to identify and respond to emerging fashion trends; the impact of disruptions in our distribution or information technology operations; the impact of natural disasters, other public health crises, political crises, civil unrest, and other catastrophic events on our operations and the operations of our suppliers, as well as on consumer confidence and purchasing in general; risks associated with the seasonality of the retail industry; the impact of unauthorized disclosure or misuse of personal and confidential information about our customers, vendors and employees, including as a result of a cybersecurity breach; our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, our ability to implement and adapt to new technology and systems, our ability to open new stores in a timely and profitable manner, including our entry into major new markets, and the availability of sufficient funds to implement our business plans; higher than anticipated costs associated with the closing of underperforming stores; the inability of manufacturers to deliver products in a timely manner; an increase in the cost, or a disruption in the flow, of imported goods; the impact of regulatory changes inthe United States , including minimum wage laws and regulations, and the countries where our manufacturers are located; the resolution of litigation or regulatory proceedings in which we are or may become involved; continued volatility and disruption in the capital and credit markets; future stock repurchases under our stock repurchase program and future dividend payments. For a more detailed discussion of risk factors impacting us, see the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year endedJanuary 30, 2021 , and "Risk Factors" in Part II, Item 1A of our Quarterly Reports on Forms 10-Q for the quarters endedMay 1, 2021 andJuly 31, 2021 .
General
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") 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 on Form 10-Q, as well as our Annual Report on Form
10-K for the fiscal year ended January 30, 2021 as filed with the SEC .
Overview of Our Business
Shoe Carnival, Inc. is one of the nation's largest family footwear retailers, providing customers the convenience of shopping at any of our store locations, our mobile app or online at www.shoecarnival.com. Our stores combine competitive pricing with a promotional, high-energy in-store environment that encourages customer participation and injects fun and excitement into every shopping experience. We believe our distinctive shopping experience gives us various competitive advantages, including increased multiple unit sales; the building of a loyal, repeat customer base; the creation of word-of-mouth advertising; and enhanced sell-through of in-season goods. A similar customer experience is reflected in our e-commerce platform through special promotions and limited time sales. Our objective is to be the omnichannel retailer-of-choice for on-trend branded and private label footwear for the entire family. Our product assortment, whether shopping in a physical store or on our e-commerce platform, includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes. Our average physical store carries shoes in four general categories - women's, men's, children's and athletics, as well as a broad range of accessories. Footwear is organized by category and brand, creating strong brand statements within the aisles. These brand statements are underscored by branded signage on endcaps and in-line signage throughout the store. Our signage may highlight a vendor's product offerings or sales promotions, or may highlight seasonal or lifestyle 15
-------------------------------------------------------------------------------- statements by grouping similar footwear from multiple vendors. Over 100 of our physical stores have strongly branded Nike shops that highlight Nike products within the stores, and we expect to add at least 100 more Nike shops to our physical stores through 2023. Our e-commerce platform offers customers the same assortment of merchandise in all categories of footwear with expanded options in certain instances. Critical Accounting Policies We use judgment in reporting our financial results. This judgment involves estimates based in part on our historical experience and incorporates the impact of the current general economic climate and company-specific circumstances. However, because future events and economic conditions are inherently uncertain, our actual results could differ materially from these estimates. Our accounting policies that require more significant judgments include those with respect to merchandise inventories, valuation of long-lived assets, leases, and income taxes. The accounting policies that require more significant judgment are discussed in our Annual Report on Form 10-K for the fiscal year endedJanuary 30, 2021 , and there have been no material changes to those critical accounting policies.
Information regarding the COVID-19 Coronavirus Pandemic ("COVID-19")
We continue to closely monitor and manage the impact of the COVID-19 pandemic, and the safety and well-being of our customers, employees and business partners remains a top priority. The COVID-19 pandemic has significantly impacted, and is expected to continue to impact, our operations, supply chains, distribution processes, and overall economic conditions and consumer spending for the foreseeable future. In response to the COVID-19 pandemic, all of our physical stores were temporarily closed effectiveMarch 19, 2020 . Our e-commerce platform continued to operate, and our e-commerce sales increased significantly in fiscal 2020 as customers shifted purchases to our online channel. We began reopening our physical stores in accordance with applicable public health guidelines in lateApril 2020 . Thus, substantially all of our physical stores were closed for approximately 50% of the first fiscal quarter of 2020. By the beginning of the second quarter of fiscal 2020, approximately 50% of our stores were reopened, and by earlyJune 2020 , substantially all of our stores had reopened. We did not have any stores closed as ofOctober 30, 2021 or for extended periods during the first nine months of fiscal 2021 due to the pandemic.
Results of Operations Summary Information
Number of Stores Store Square Footage
Beginning End of Net End Comparable
Quarter Ended Of Period Opened Closed
Period Change of Period Store Sales(1)
383 0 6 377 (46,000 ) 4,100,000 125.8 %
July 31, 2021 377 1 0 378 12,000 4,112,000 11.4 %
October 30, 2021 378 0 1 377 (7,000 ) 4,105,000 30.1 %
Year-to-date 383 1 7 377 (41,000 ) 4,105,000 41.6 %
May 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 %
October 31, 2020 382 1 0 383 10,000 4,142,000 0.9 %
Year-to-date 392 3 12 383 (78,000 ) 4,142,000 (8.8 )%
(1) Comparable store sales is a key performance indicator for us. Comparable
store sales include stores that have been open for 13 full months after
such stores' grand opening prior to the beginning of the period, including
those stores that have been relocated or remodeled. Therefore, stores
recently opened or closed are not included in comparable store sales. We
include e-commerce sales in our comparable store sales as a result of our
omnichannel retailer strategy. Due to our omnichannel retailer strategy, we
view e-commerce sales as an extension of our physical stores.
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The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated:
Thirteen Thirteen Thirty-nine Thirty-nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
October 30, 2021 October 31,
2020
100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including buying,
distribution and
occupancy costs) 59.6 68.0 59.7 72.1
Gross profit 40.4 32.0 40.3 27.9
Selling, general and administrative
expenses 22.9 24.7 22.6 26.3
Operating income 17.5 7.3 17.7 1.6
Interest income 0.0 0.0 0.0 0.0
Income tax expense 4.4 1.9 4.5 0.4
Net income 13.1 % 5.4 % 13.2 % 1.2 %
Given the significant impact of the COVID-19 pandemic on our fiscal 2020
results, we have included certain comparisons in this MD&A between fiscal 2021
and fiscal 2019 to provide further context regarding our fiscal 2021 results of
operations.
The shares outstanding and net income per share information throughout this MD&A
has been adjusted retroactively for all periods presented as a result of a
two-for-one stock split of the outstanding shares of our common stock held by
shareholders of record on July 6, 2021 that was completed on July 19, 2021 . See
Note 1 - "Basis of Presentation" to our Notes to Consolidated Financial
Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q for
additional information on the stock split.
Executive Summary for the Third Fiscal Quarter Ended
The third quarter of fiscal 2021 was another record-breaking quarter. Results for the third quarter of fiscal 2021 were the highest in terms of quarterly net sales, gross profit, operating income and diluted net income per share in our history, surpassing our previous records set in the second and first quarters of fiscal 2021. Thus, this fiscal quarter represented the third consecutive quarter where we established all-time quarterly records. Through the first nine months of fiscal 2021, our diluted net income per share of$4.69 exceeded the diluted net income per share earned during the last five fiscal years combined.
Comparable store sales in the third quarter of fiscal 2021 increased 30.1% compared to the third quarter of fiscal 2020 and increased 31.4% compared to the third quarter of fiscal 2019.
We believe these record-breaking results were driven by the following:
• our inventory selection; • our more focused promotional strategy;
• our customer base returning to a more normal lifestyle, including going back
to work and fully back to in-person learning; and
• a stronger economy, inclusive of the impacts of government stimulus on
consumer spending.
During the third quarter of fiscal 2021, physical store traffic increased 29.9% compared to the third quarter of fiscal 2020 and increased 2.6% compared to the third quarter of fiscal 2019. Through the first nine months of fiscal 2021, physical store traffic increased over 40% compared to the same period in fiscal 2020. The increased store traffic, combined with stable conversion rates, resulted in an increased number of converted customers, compared to the prior year periods. All of our major product categories had comparable store sale increases ranging from low to mid double digits compared to the third quarter of fiscal 2020 and the third quarter of fiscal 2019. These increases were driven by higher average per unit prices across all categories and, overall, more units sold.
Highlights for the third quarter of fiscal 2021 and a brief discussion of some key initiatives follows:
• Net sales for the third quarter of fiscal 2021 of
all-time quarterly record, eclipsing the previous all-time records
established earlier this fiscal year.
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• Net income for the third quarter of fiscal 2021 was
per diluted share, compared to net income of
diluted share in the third quarter of fiscal 2020. Earnings in the third
quarter of fiscal 2021 exceeded any previous quarterly or full-year record,
including exceeding results recognized in the first quarter and second
quarter of fiscal 2021, which were records at those points in time.
• We achieved record quarterly gross profit of
quarter of fiscal 2021. Gross profit margin as a percent of sales increased
8.4 percentage points compared to the third quarter of fiscal 2020 to 40.4%
and increased 9.5 percentage points compared to the third quarter of fiscal
2019.
• We had no borrowings during the third quarter of fiscal 2021 and ended the
quarter with $191.2 million of cash, cash equivalents and marketable
securities.
• In the third quarter of fiscal 2021, we continued to increase membership in
our Shoe Perks customer loyalty program, which grew over 10% compared to the
prior year third quarter. This brought total membership in the program to
over 28.5 million customers as of
Perks program affords us opportunities to communicate, build relationships
and engage with our most loyal shoppers, which we believe will result in
long-term customer commitment to our brand.
• We are continuing to modernize our stores and expect to have approximately
100 stores completed by the spring of fiscal 2022, within our plan to
modernize 90 percent of our store portfolio by 2025.
Results of Operations for the Third Quarter Ended
Net sales were a record$356.3 million during the third quarter of fiscal 2021 and increased 29.8% compared to the third quarter of fiscal 2020. Comparable stores sales increased 30.1% compared to the third quarter of fiscal 2020. Sales generated from our comparable physical stores increased 32.8% for the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020 and 22.6% compared to the third quarter of fiscal 2019. Sales generated from our e-commerce platform increased 12.5% compared to the third quarter of fiscal 2020 and 186.2% compared to the third quarter of fiscal 2019. E-commerce sales were approximately 12% of merchandise sales in the third quarter of fiscal 2021, compared to 13% in the third quarter of fiscal 2020 and 5% in the third quarter of fiscal 2019. Net sales were positively impacted by continued demand for our merchandise as result of our merchandise selection, the continued easing of COVID-19 restrictions and customers returning a more normal lifestyle, including going back to work and fully back to in-person learning, and a stronger economy (including impacts from consumer-based government stimulus). Net sales in the third quarter of fiscal 2021 were favorably impacted by increased average transaction price and more units sold compared to the third quarter of fiscal 2020, with traffic 2.6% above pre-pandemic levels experienced in the third quarter of fiscal 2019. The increase in average transaction price was primarily driven by our more focused promotional activity.
Gross Profit
Gross profit was a record$144.1 million during the third quarter of fiscal 2021, an increase of$56.3 million compared to the third quarter of fiscal 2020. Gross profit margin in the third quarter of fiscal 2021 increased to 40.4% compared to 32.0% in the third quarter of fiscal 2020 and 30.9% in the third quarter of fiscal 2019. Merchandise margin increased 6.7 percentage points compared to the third quarter of fiscal 2020 and 8.3 percentage points compared to the third quarter of fiscal 2019. Our more focused promotional strategy drove a higher merchandise margin compared to both fiscal 2020 and 2019. We began eliminating broad-based use of the "buy one get one half off" promotional strategy during fiscal 2020 and have completely eliminated its broad use during the current fiscal year. As a percentage of sales, our buying, distribution and occupancy costs decreased 1.7 percentage points compared to the third quarter of fiscal 2020 due to the leveraging effect of higher sales, despite higher supply chain expense.
Selling, General and Administrative Expenses ("SG&A")
SG&A increased$14.0 million in the third quarter of fiscal 2021 to$81.6 million compared to$67.6 million in the third quarter of fiscal 2020. Nearly half of the increase in SG&A in the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020 was due to increased advertising expense, with the remaining increase primarily attributable to store level wages, including incentive compensation. As a percentage of net sales, SG&A was 22.9% in the third quarter of fiscal 2021 compared to 24.7% in the third quarter of fiscal 2020 and 24.3% recorded in the third quarter of fiscal 2019, with the decrease due to the leveraging effect of higher sales. 18
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Income Taxes
The effective income tax rate for the third quarter of fiscal 2021 was 24.8% compared to 26.8% for the same period in fiscal 2020. 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. The lower quarterly effective tax rate was primarily due to the timing of discrete tax adjustments and increased utilization of foreign tax credits associated with ourPuerto Rico operations. For the full 2021 fiscal year, we expect our tax rate to be between 25% and 26% compared to the 25.8% effective tax rate recognized during the full 2020 fiscal year.
Results of Operations for the Nine-Month Period Ended
Net sales were$1,017.0 million year-to-date in fiscal 2021, a 40.7% increase over the prior year's year-to-date net sales of$722.9 million . The overall increase in net sales was primarily due to our more focused promotional strategies and inventory selection. The temporary closure of our physical stores for approximately 50% of the first quarter of fiscal 2020 as a result of the COVID-19 pandemic, with some stores closed throughMay 2020 , decreased net sales in the prior year. Comparable stores sales increased 41.6% compared to the first nine months of fiscal 2020 and increased 29.2% compared to the first nine months of fiscal 2019. Gross Profit Gross profit was$410.0 million during the first nine months of fiscal 2021, an increase of$208.1 million compared to the first nine months of fiscal 2020. Gross profit margin in the first nine months of fiscal 2021 increased to 40.3% compared to 27.9% in fiscal 2020 and 30.4% in fiscal 2019. Merchandise margin increased 10.0 percentage points compared to the first nine months of fiscal 2020 and 8.7 percentage points compared to the first nine months of fiscal 2019. Our more focused promotional strategies throughout fiscal 2021 drove a higher merchandise margin compared to both fiscal 2020 and 2019. A more standard product mix, with more non-athletic merchandise sold in fiscal 2021 compared to fiscal 2020, further increased margins compared to fiscal 2020. As a percentage of sales, our buying, distribution and occupancy costs decreased 2.4 percentage points compared to the first nine months of fiscal 2020 and 1.2 percentage points compared to the first nine months fiscal 2019 primarily due to the leveraging effect of increased sales, offset somewhat by increased freight and distribution labor costs.
Selling, General and Administrative Expenses
SG&A increased$39.7 million to$230.2 million in the first nine months of fiscal 2021 compared to$190.5 million in the first nine months of fiscal 2020. As a percentage of net sales, SG&A was leveraged to 22.6% in the first nine months of fiscal 2021 compared to 26.3% in the first nine months of fiscal 2020 and 24.2% in the first nine months fiscal 2019. Compared to the first nine months of fiscal 2020, the increase in SG&A primarily correlated with our record performance, in terms of increased performance-based incentive compensation, general wages (inclusive of CARES Act payroll retention tax credits recognized in fiscal 2020) and variable costs, such as credit card fees. SG&A also increased due to higher advertising expense, as well as market return volatility on our deferred compensation plan and higher stock-based compensation. Store level wages, incentives paid to store level employees, and annual performance-based compensation comprised the majority of the year-to-date increase compared to the prior year. Our performance year-to-date has exceeded annual fiscal 2021 performance targets; therefore, virtually all annual performance-based compensation expected for the full year has been recognized.
Income Taxes
The effective income tax rate year-to-date for fiscal 2021 was 25.1% compared to 23.0% for the same period in fiscal 2020. The higher effective rate was primarily attributable to more unfavorable permanent differences and discrete tax adjustments, partially offset by increased utilization of foreign tax credits associated with ourPuerto Rico operations.
Liquidity and Capital Resources
Our primary sources of liquidity are$191.2 million of cash, cash equivalents and marketable securities on hand at the end of the third fiscal quarter of 2021, cash generated from operations, and availability under our$100 million credit facility. While the continued economic uncertainty and future effects on customer behavior caused by the COVID-19 pandemic makes our operating cash flow less predictable, 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 working capital, which are principally inventory purchases, investments in our stores, such as new stores, remodels and relocations, distribution center initiatives, lease payments associated with our real estate leases, potential dividend payments, potential share repurchases under our share repurchase program, and the financing of capital projects, including investments in new systems. As part of our growth strategy, we may also pursue strategic acquisitions of other footwear retailers. 19
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Cash Flow - Operating Activities
Net cash generated from operating activities was$120.5 million in the first nine months of fiscal 2021 compared to$0.2 million during the first nine months of fiscal 2020. The increase in operating cash flow was primarily driven by higher cash receipts on increased sales, partially offset by inventory purchases and payments for operating expenses and income taxes. Working capital increased on a year-over-year basis and totaled$333.8 million atOctober 30, 2021 compared to$214.9 million atOctober 31, 2020 . The increase was primarily attributable to increased cash and marketable securities positions. Our current ratio was 3.1 as ofOctober 30, 2021 compared to 2.7 as ofOctober 31, 2020 .
Cash Flow - Investing Activities
Our cash outflows for investing activities are normally for capital expenditures. During the first nine months of fiscal 2021, we expended$20.4 million for the purchase of property and equipment, primarily related to our store portfolio modernization plan. During the first nine months of fiscal 2020, we expended$10.1 million for the purchase of property and equipment, primarily related to investments in technology and normal asset replacement activities. During the first nine months of fiscal 2021, we invested approximately$17.5 million in publicly traded mutual funds designed to mitigate income statement volatility associated with our nonqualified deferred compensation plan. Additional information regarding these marketable securities can be found in Note 5 - "Fair Value Measurements" to our Notes to Consolidated Financial Statements contained in PART I, ITEM 1 of this Quarterly Report on Form 10-Q.
Cash Flow - Financing Activities
Our cash outflows for financing activities are typically for cash dividend payments, share repurchases or payments on our credit facility. Shares of our common stock can be either acquired as part of a publicly announced repurchase program or withheld by us in connection with employee payroll tax withholding upon the vesting of stock-based compensation awards that are settled in shares. Our cash inflows from financing activities generally reflect stock issuances to employees under our Employee Stock Purchase Plan and borrowings under our credit facility. During the first nine months of fiscal 2021, net cash used in financing activities was$15.8 million compared to$5.4 million during the first nine months of fiscal 2020. The increase in net cash used in financing activities was primarily due to the repurchase of$7.1 million of shares in fiscal 2021 associated with our Board of Directors' authorized share repurchase program. In fiscal 2021 we also increased our dividend payments and more shares were withheld upon the vesting of stock-based compensation awards. During the first nine months of fiscal 2021, we did not borrow or repay funds under our credit facility. Letters of credit outstanding were$700,000 atOctober 30, 2021 , and our borrowing capacity was$99.3 million . Our credit facility requires us to maintain compliance with various financial covenants. See Note 7 - "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 endedJanuary 30, 2021 for a further discussion of our credit facility and its covenants. We were in compliance with these covenants as ofOctober 30, 2021 . Capital Expenditures Capital expenditures for fiscal 2021, including actual expenditures for the first nine months of fiscal 2021, are expected to be between$30 million and$35 million , with approximately$24 million to$26 million to be used for a new store, relocations and remodels and approximately$2 million to$4 million for upgrades to our distribution center and e-commerce platform. The remaining capital expenditures are expected to be incurred for various other store improvements, continued investments in technology and normal asset replacement activities. The resources allocated to these projects are subject to near-term changes depending on the impacts associated with the COVID-19 pandemic and ongoing supply chain disruptions. Furthermore, the actual amount of cash required for capital expenditures for store operations depends in part on the number of stores opened, the number of stores relocated, the amount of lease incentives, if any, received from landlords and the number of stores remodeled. 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.
Store Portfolio
We continually analyze our store portfolio and the potential for new stores
based on our view of internal and external opportunities and challenges in the
marketplace. Increasing market penetration by opening new stores has
historically been a key component of our long-term growth strategy, and we
continue to focus on generating positive long-term financial performance from
our store portfolio. We expect to pursue opportunities for store growth across
large and mid-size markets as we leverage customer data from our customer
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relationship management program and more attractive real estate options become
available. In fiscal 2021, we opened one new store within our existing
geographic footprint and do not anticipate opening any more stores this fiscal
year. We anticipate store growth will return after fiscal 2021.
When we identify a store that produces, or may potentially produce, low or
negative contribution, we either renegotiate lease terms, relocate or close the
store. In instances when underperformance indicates the carrying value of a
store's assets may not be recoverable, we impair the store. Although store
closings could reduce our overall net sales volume, we believe this strategy
will realize long-term improvement in operating income and diluted net income
per share. Depending upon the results of lease negotiations with certain
landlords of underperforming stores, we may increase or decrease the number of
store closures in future periods. We closed seven stores in the first nine
months of fiscal 2021 and expect to close three additional stores by the end of
the current fiscal year.
Our future store strategies may continue to be impacted by the current economic uncertainty associated with the COVID-19 pandemic.
Dividends
OnSeptember 16, 2021 , the Board of Directors approved the payment of a third quarter cash dividend to our shareholders. The quarterly cash dividend of$0.070 per share was paid onOctober 18, 2021 to shareholders of record as of the close of business onOctober 4, 2021 . In fiscal 2020, the third quarter dividend was$0.045 per share. During the first nine months of fiscal 2021 and 2020, we returned$6.0 million and$3.9 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. Our credit agreement permits the payment of cash dividends as long as no default or event of default exists under the credit agreement both immediately before and immediately after giving effect to the cash dividends, and the aggregate amount of cash dividends for a fiscal year does not exceed$10 million . See Note 7 - "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 endedJanuary 30, 2021 for a further discussion of our credit facility and its covenants. Share Repurchase Program OnDecember 15, 2020 , our Board of Directors authorized a share repurchase program for up to$50.0 million of outstanding common stock, effectiveJanuary 1, 2021 (the "2021 Share Repurchase Program"). The purchases may be made in the open market or through privately negotiated transactions from time-to-time throughDecember 31, 2021 and in accordance with applicable laws, rules and regulations. The 2021 Share Repurchase Program may be amended, suspended or discontinued at any time and does not commit us to repurchase shares of our common stock. We have funded, and intend to continue to fund, share repurchases from cash on hand, and any shares acquired will be available for stock-based compensation awards and other corporate purposes. The actual number and value of the shares to be purchased will depend on the performance of our stock price and other market conditions. Due to uncertainty related to the COVID-19 pandemic, share repurchases have been limited in fiscal 2021 and no repurchases were made in fiscal 2020. Shares totaling 91,594 shares were repurchased during the third quarter of fiscal 2021 at a cost of$3.2 million . We purchased a total of 208,662 shares at a cost of$7.1 million under this share repurchase program in fiscal 2021. As ofOctober 30, 2021 , we had$42.9 million available for future repurchases. We will continue to evaluate the repurchase of shares under the 2021 Share Repurchase Program given the uncertainty. Our credit facility stipulates that distributions in the form of redemptions of Equity Interests (as defined in the credit agreement) can be made solely with cash on hand so long as before and immediately after such distributions there are no revolving loans outstanding under the credit agreement. See Note 7 - "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 endedJanuary 30, 2021 for a further discussion of our credit facility and its covenants.
Seasonality
We have three distinct peak selling periods: Easter, back-to-school and
Christmas. Our operating results depend significantly upon the sales generated
during these periods. To prepare for our peak shopping seasons, we must order
and keep in stock significantly more merchandise than we would carry during
other periods of the year. Any unanticipated decrease in demand for our
products or a supply chain disruption that reduces inventory availability during
these peak shopping seasons in future periods could reduce our net sales and
gross profit and negatively affect our profitability.
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Recent Accounting Pronouncements
See Note 3 - "Recently Issued Accounting Pronouncements" in the accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that may have an impact on our condensed consolidated financial statements when adopted.
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