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 outbreak, mitigating efforts deployed by government agencies and the public at large, and the overall impact from such outbreak on the operations of our stores, economic conditions, financial market volatility, consumer spending and our supply chain and distribution processes; general economic conditions in the areas of the continentalUnited States in which our stores are located and the impact of the ongoing economic crisis inPuerto Rico on sales at, and cash flows of, our stores located inPuerto Rico ; 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 at our stores; 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 website and to successfully grow our e-commerce sales; the potential impact of national and international security concerns on the retail environment; changes in our relationships with key suppliers; our ability to control costs and meet our labor needs in a rising wage 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 effectiveness of our inventory management; the impact of natural disasters, other public health crises, political crises, civil unrest, and other catastrophic events on our stores and 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 cyber-security breach; our ability to manage our third-party vendor relationships; our ability to successfully execute our business strategy, including the availability of desirable store locations at acceptable lease terms, 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; the impact of regulatory changes inthe United States 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; and 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 endedFebruary 1, 2020 , "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter endedMay 2, 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q.
General
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 on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year endedFebruary 1, 2020 as filed with theSEC .
Overview of Our Business
Shoe Carnival, Inc. is one of the nation's largest family footwear retailers, providing 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 site and mobile app through special promotions and limited time sales. Our objective is to be the destination retailer-of-choice for value-priced, on-trend branded and private label footwear. Our product assortment includes dress and casual shoes, sandals, boots and a wide assortment of athletic shoes for the entire family. Our average store carries shoes in four general categories - women's, men's, children's and athletics, as well as a broad range of accessories such as socks, belts, shoe care items, handbags, hats, sport bags, backpacks and wallets. 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 16 -------------------------------------------------------------------------------- statements by grouping similar footwear from multiple vendors. Our e-commerce site offers customers a large assortment of products in all categories of footwear with an increased depth of sizes and colors that may not be available in all stores. 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, insurance reserves 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 endedFebruary 1, 2020 . There have been no material changes to our critical accounting policies and estimates discussed in our Annual Report on Form 10-K for the fiscal year endedFebruary 1, 2020 .
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
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 %
Year-to-date 392 2 12 382 (88,000 ) 4,132,000 (14.0 )%
May 4, 2019 397 0 2 395 (22,000 ) 4,246,000 (0.2 )%
August 3, 2019 395 0 2 393 (16,000 ) 4,230,000 1.4 %
Year-to-date 397 0 4 393 (38,000 ) 4,230,000 0.6 %
Comparable store sales for the periods indicated include stores that have been
open for 13 full months after such store's grand opening prior to the beginning
of the period, including those stores that have been relocated or remodeled.
Therefore, stores opened or closed during the periods indicated are not included
in comparable store sales. We include e-commerce sales in our comparable store
sales. Due to our multi-channel retailer strategy, we view e-commerce sales as
an extension of our physical stores.
The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated:
Thirteen Thirteen Twenty-six Twenty-six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including buying,
distribution and
occupancy costs) 72.5 69.4 74.6 69.9
Gross profit 27.5 30.6 25.4 30.1
Selling, general and administrative
expenses 22.7 24.8 27.4 24.1
Operating income/(loss) 4.8 5.8 (2.0 ) 6.0
Interest income 0.0 0.0 0.0 0.0
Income tax expense/(benefit) 1.5 1.4 (0.6 ) 1.1
Net income/(loss) 3.3 % 4.4 % (1.4 )% 4.9 %
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, overall economic
conditions and consumer spending for the foreseeable future. As guidance and
mandates from governments and health officials continue to evolve, closures of
some or all our stores may reoccur, and sales, including e-commerce sales, may
be reduced. The COVID-19 pandemic has delayed and lengthened the back-to-school
shopping period and, at this time, considerable uncertainty exists regarding how
the COVID-19 pandemic may affect the Christmas shopping period.
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In response to the COVID-19 pandemic, all of our brick-and-mortar stores were
closed effective March 19, 2020 and substantially all of our stores were closed
for approximately 50% of the first fiscal quarter of 2020. Our website and
mobile app continued to accept orders after March 19, 2020 and e-commerce sales
increased significantly as customer buying habits shifted to our online
channel. Approximately 50% of our stores were reopened by the beginning of our
second quarter and substantially all stores had reopened by early June. As
stores have reopened, we experienced increases in conversion, total average
transaction and units per transaction despite reduced traffic due to the
COVID-19 pandemic. Generally, since the reopenings, sales exceeded our original
fiscal 2020 plan, with some stores exceeding plan and other stores showing
declines. In the last two weeks of the second quarter of fiscal 2020, we
experienced declines in sales compared to the prior year due to delays in
back-to-school start dates. In our markets, school district announced return
dates are on average approximately two to three weeks later than the prior year
and we expect fiscal 2020 back-to-school shopping to continue into October. As
of
We have undertaken a number of actions to mitigate the financial impact of the COVID-19 pandemic, preserve capital and keep our customers and employees safe. These actions include:
• Implementing new health and safety procedures at our stores, corporate
headquarters and distribution center. Materials, such as thermometers,
cleaning supplies, new social distancing signage, and personal protective
equipment have been distributed to our facilities.
• Enhancing our liquidity by exercising the full accordion feature under our
existing credit facility to increase our borrowing capacity under the
facility, now collateralized by our inventory, from
million, and eliminating a covenant through the first quarter of fiscal year
2021 that may have limited our access to the increased borrowing capacity.
• Suspending repurchases under our share repurchase program until further
notice.
• Continuing to pay employees while our stores were closed and recording tax
credits in selling, general and administrative ("SG&A") expenses that offset
wage expense. This credit was associated with the Coronavirus Aid, Relief,
and Economic Security ("CARES") Act, and represents an employee retention
tax credit to support wages paid to employees while such employees were not
working.
• Reaching agreements with many of our landlords to defer April, May and June
lease payments. We continued to recognize lease expense on a straight-line
basis in accordance with Generally Accepted Accounting Principles.
• Temporarily reducing the base salaries of our executives and other senior
members of the management team and the annual cash retainer fee of the Board
of Directors and delaying the implementation of wage increases for certain
employees while a majority of our brick-and-mortar stores were closed.
• Reducing inventory receipts and inventory on hand and extending payment
terms with many of our business partners.
• Reducing or deferring non-essential corporate spending and capital projects
and implementing hiring freezes.
• Postponing marketing activities for brick-and-mortar stores and evaluating
promotional activities.
As a result of continuing to straight-line lease expense and pay our employees,
our operating expenses in the first and second quarters of fiscal 2020 were
generally consistent with the comparable periods from the prior fiscal
year. However, market volatility principally caused by the COVID-19 pandemic has
impacted our deferred compensation liabilities and, as a result, our overall
operating expenses. Year-to-date in fiscal 2020, we recorded $2.5 million in
impairment charges on long-lived assets for eight underperforming stores and
have closed 12 stores. Given the uncertainties surrounding the COVID-19
pandemic, additional impairments and closures may result in future periods.
Executive Summary for Second Quarter Ended
Our second quarter sales have historically been impacted by seasonality, the timing of tax free holidays and back-to-school shopping. In the second quarter of fiscal 2020, our historical sales patterns were significantly impacted by the COVID-19 pandemic, resulting in a shift in customer behavior away from adult dress product to higher demand in the adult athletics, children's sandals and infant shoe categories. The pandemic also impacted the timing of back-to-school start dates in our operating markets, resulting in lower sales in the last two weeks of the second quarter compared to the prior year. Categories such as children's athletics were negatively impacted by the delay in back-to-school shopping, posting a comparable store sales decrease in the low double-digits in the second quarter of fiscal 2020.
Highlights for the second quarter of fiscal 2020 and a brief discussion of some key initiatives are as follows:
• Net sales were a record
4.6% compared to our previous record sales set in the third quarter of
fiscal 2017. Compared to the prior year second quarter, net sales increased
$32.6 million , or 12.1%. Net sales 18
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through our e-commerce platform increased 332% compared to the prior year
period and represented over 20% of total revenues. This drove a chain-wide
comparable store sales increase of 12.6% during the second quarter of fiscal
2020.
• Gross profit was generally flat, increasing
quarter ended
As a percentage of net sales, gross profit decreased to 27.5% compared to
30.6% in the second quarter of fiscal 2019. Merchandise margin decreased by
3.7% quarter-over-quarter due to higher shipping-related costs associated
with e-commerce sales and an increased mix of adult athletic sales. Athletic
products typically carry lower margins compared to seasonal warm weather and
dress products. Of our
was attributable to higher men's and women's athletic sales. Our buying,
distribution and occupancy costs, which are generally fixed in nature,
decreased 0.6% as a percentage of net sales compared to the second quarter
of fiscal 2019 due to the leveraging effect of higher sales.
• Net income for the quarter ended
per diluted share, compared to net income of $11.8 million , or $0.80 per
diluted share, for the quarter ended August 3, 2019 . This decrease wasprimarily attributable to a lower gross margin and a higher effective income
tax rate.
• We ended the quarter with no cash borrowings outstanding and
of cash and cash equivalents on our Condensed Consolidated Balance Sheet.
• We further amended our Credit Agreement during the second quarter of fiscal
2020 to eliminate a covenant through the first quarter of fiscal year 2021
that could have limited access to our
• In the second quarter of fiscal 2020, we launched advanced third-party
transportation and warehouse management platforms. We plan to deploy a
third-party order management system in the third quarter of fiscal 2020. We
are committed to implementing best practices in these areas and believe
these enhanced systems will enable us to meet the complex demands of
multi-channel fulfillment, position us for long-term growth and enhance
customer satisfaction and convenience in an increasingly competitive
environment.
• In fiscal 2020, we commenced implementation of a new, third-party
merchandise planning system. This hosted, cloud-based platform is amulti-year project that includes a complete range of critical financial
planning functions that will enhance the efficiency and effectiveness of our
merchandise buying process. The new merchandise planning system will provide
a unified strategic planning and budgeting process that is supported by
various solutions, including strategic and assortment planning, store
allocation and replenishment and in-season management. We believe thiscollaborative platform will unify our buy plans, optimize inventory levels,
help achieve more sales at higher margins and allow us to set goals for
multiple channels and formats common in today's competitive environment.
• In the second quarter of fiscal 2020, we continued to increase the
membership in our Shoe Perks customer loyalty program, adding over 2 million
members compared to the second quarter of the prior year, which brought
total membership to over 25 million customers as of
number of our most loyal customers, those who qualify for the Gold tier,
increased 11.7% compared to the second quarter of the prior year and
represent approximately 16.2% of total Shoe Perks members as of
2020. We believe our Shoe Perks program affords us opportunities to
communicate, build relationships and engage with our most loyal shoppers,
which we believe will result in long-term sales gains.
Results of Operations for the Second Quarter Ended
Net sales were$300.8 million during the second quarter of fiscal 2020, a 12.1% increase over the prior year's second quarter net sales of$268.2 million . Comparable stores sales increased 12.6% and e-commerce sales increased 332% quarter-over-quarter. With respect to product mix, more athletic shoes were sold in the quarter which drove higher revenue.
Gross Profit
Gross profit was essentially flat quarter over quarter and gross profit margin decreased to 27.5% compared to 30.6% in the second quarter of fiscal 2019. The decrease in margin was primarily due to higher shipping-related costs associated with the increase in e-commerce sales and a product mix encompassing increased adult athletics, which generally carry lower margins compared to seasonal and other non-athletic products. These decreases were partially offset by the leveraging effect of higher sales on buying, distribution, and occupancy costs, which are generally fixed in nature.
Selling, General and Administrative Expenses
SG&A expenses increased$1.8 million in the second quarter of fiscal 2020 to$68.2 million compared to$66.4 million in the second quarter of fiscal 2019. The primary factors were as follows:
• E-commerce fulfillment costs increased
that channel.
19
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• Incentive compensation expense increased approximately
improved financial performance.
• Due to financial market volatility, our deferred compensation planexperienced higher returns compared to the prior year, which increased
operating expenses by approximately
• Store-level wages decreased
attributable to an employee payroll retention tax credit, a component of the
CARES Act that was signed into law in
any employees. This credit lowered our payroll tax expense to support wages
paid to our employees while they were not working.
Income Taxes
The effective income tax rate for the second quarter of fiscal 2020 was 29.6% as compared to 24.5% for the same period in fiscal 2019. 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 increase in effective rate in the quarter was primarily due to a reversal of a net operating loss carryback recorded in the first quarter of fiscal 2020 due to improved financial performance. For the full fiscal year of 2020, we expect our tax rate to be approximately 23% compared to our 21.6% effective tax rate in fiscal 2019.
Results of Operations for the Six-Month Period Ended
Net sales were$448.3 million year-to-date in fiscal 2020, a 14.1% decrease over the prior year's year-to-date net sales of$522.0 million . The decrease in net sales was primarily due to the temporary closure of our brick-and-mortar stores for approximately 50% of the first quarter of fiscal 2020 as a result of the COVID-19 pandemic. The decrease in brick-and-mortar sales was partially offset by a 249% increase in e-commerce sales year-over-year as our customers shifted to online shopping amid government mandated stay-at-home orders.
Gross Profit
Year-to-date gross profit margin for fiscal 2020 decreased to 25.4% compared to 30.1% year-to-date in fiscal 2019. The decrease was primarily due to higher shipping-related costs associated with the increase in e-commerce sales, a higher mix of adult athletic sales that carry lower margins and the deleveraging effect of lower sales, primarily on occupancy costs, which are fixed in nature.
Selling, General and Administrative Expenses
Year-to-date SG&A decreased$3.0 million to$122.9 million on a year-to-date basis compared to$126.0 million in fiscal 2019. The primary factors were as follows:
• Store-level wages decreased
attributable to an employee payroll retention tax credit, a component of the
CARES Act that was signed into law in
any employees. This credit lowered our payroll tax expense to support wages
paid to our employees while they were not working.
• E-commerce fulfillment costs increased
through that channel.
• Share-based compensation expense decreased approximately
fewer share-based awards were outstanding during fiscal 2020 and awards
granted in the first quarter of fiscal 2020 were issued at a lower share
price and vest over a longer period compared to awards granted in prior
years.
• Our deferred compensation plan experienced reduced returns compared to the
prior year, which decreased operating expenses approximately
year-over-year.
• Depreciation and amortization included in selling, general and
administrative expenses declined approximately
primarily due to operating fewer stores during fiscal 2020.
• During fiscal 2020, we recorded impairment charges on long-lived assets
totaling
recorded in the prior year.
20
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Income Taxes
The effective income tax rate year-to-date for fiscal 2020 was 31.5% as compared to 18.6% for the same period in fiscal 2019. The primary reason for the change in our effective tax rate was the$1.9 million tax benefit related to the vesting of equity-based compensation recognized in the first quarter of fiscal 2019 and the timing of other discrete tax adjustments.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents on hand, receipts from customers and availability under our credit facility. While the economic uncertainty and future effects on customer behavior caused by the COVID-19 pandemic make 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 working capital needs, which are principally inventory purchases, store initiatives, dividend payments, the financing of capital projects, including investments in new systems, and various other commitments and obligations. We have suspended repurchases under our share repurchase program to preserve liquidity during the COVID-19 pandemic.
Cash Flow - Operating Activities
Our net cash generated from operating activities was$26.2 million in the first six months of fiscal 2020 compared to net cash generated from operating activities of$10.0 million in the first six months of fiscal 2019. The increase in operating cash flow was primarily driven by the timing of vendor payments for inventory, partially offset by reduced cash receipts on lower sales and our continued investment in software as a service hosted arrangements.
Working capital decreased to
Cash Flow - Investing Activities
Our cash outflows for investing activities are primarily for capital
expenditures. Year-to-date in fiscal 2020, we expended
Cash Flow - Financing Activities
Our cash outflows for financing activities are primarily for cash dividend payments, share repurchases and 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 equity awards. Our cash inflows from financing activities have represented purchases under our Employee Stock Purchase Plan and borrowings under our credit facility. Year-to-date in fiscal 2020, net cash used in financing activities was$4.2 million compared to$28.1 million year-to-date in fiscal 2019. The decrease in net cash used in financing activities was primarily due to the suspension of repurchases under our share repurchase program and fewer shares withheld upon the vesting of equity awards during the first quarter of fiscal 2020 compared to the first quarter of fiscal 2019. During fiscal 2020, we borrowed and repaid$24.9 million under our credit facility. We had no outstanding borrowings under our credit facility atAugust 1, 2020 . Year-to-date in fiscal 2019, we borrowed and repaid$20 million under our credit facility. Letters of credit outstanding were$1.2 million atAugust 1, 2020 . Our credit facility requires us to maintain compliance with various financial covenants, the most restrictive of which are disclosed in Note 7 - "Debt" to our Notes to Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. We were in compliance with these covenants as ofAugust 1, 2020 . Capital Expenditures Capital expenditures for fiscal 2020, including actual expenditures during in the first half of that fiscal year, are expected to be$15 million to$16 million , with approximately$8 million to$10 million to be used for new stores, relocations and remodels and approximately$3 million to$4 million for upgrades to our distribution center. 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. Further, 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 21
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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 Openings and Closings - Fiscal 2020
Increasing market penetration by opening new stores has historically been a key component of our growth strategy, and we continue to focus on generating positive long-term financial performance for our store portfolio. In fiscal 2020, we expect to open four new stores within our existing 35-state geographic footprint, two of which were opened in the second quarter. In the first half of fiscal 2020, we closed 12 stores. We expect to close one additional store in fiscal 2020. We expect to pursue opportunities for brick-and-mortar store growth across large and mid-size markets as we leverage customer data from our customer relationship management program and more attractive real estate options become available. Further, our future store growth may continue to be impacted by the current economic uncertainty associated with the COVID-19 pandemic. We continually analyze our portfolio of stores, with a concentration on underperforming stores, to meet our long-term goal of increasing shareholder value. Our objective is to identify and address underperforming stores that produce low or negative contribution and either renegotiate lease terms, relocate or close the stores. Even though 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. The timing and actual amount of expense recorded in closing a store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the amount of any lease buyout. We will continue to review our store portfolio based on our view of the internal and external opportunities and challenges in the marketplace.
Dividends
OnJune 11, 2020 , our Board of Directors approved the payment of our second quarter cash dividend to our shareholders. The second quarter dividend of$0.090 per share was paid onJuly 20, 2020 to our shareholders of record as of the close of business onJuly 6, 2020 . The amount per share represents a 5.9% increase over the first quarter dividend of$0.085 per share paid onApril 20, 2020 . During fiscal 2019, the first quarter dividend was in the amount of$0.080 per share and the second quarter dividend was$0.085 per share. During the first half of fiscal 2020 and 2019, we returned$2.6 million and$3.2 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 facility 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 do not exceed$10.0 million . See Note 7 - "Debt" to our Notes to Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of our credit facility and its covenants.
Share Repurchase Program
OnDecember 12, 2019 , our Board of Directors authorized a new share repurchase program for up to$50.0 million of outstanding common stock, effectiveJanuary 1, 2020 . The purchases may be made in the open market or through privately negotiated transactions from time-to-time throughDecember 31, 2020 and in accordance with applicable laws, rules and regulations. The 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, the share repurchase program 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. As ofAugust 1, 2020 , we had purchased approximately 184,000 shares at an aggregate cost of$6.9 million under this share repurchase program, and we had$43.1 million available for future repurchases. No share repurchases have been made in fiscal 2020, and, given the uncertainty associated with the COVID-19 pandemic, we do not anticipate repurchasing any shares in fiscal 2020. However, we expect to reevaluate further share repurchases on an ongoing basis. 22
-------------------------------------------------------------------------------- The new share repurchase program replaced the prior$50.0 million share repurchase program that was authorized inDecember 2018 and expired in accordance with its terms onDecember 31, 2019 . At its expiration, we had purchased approximately 933,000 shares at an aggregate cost of$30.9 million under the prior repurchase program, including 411,168 shares of common stock at a total cost of$14.0 million year-to-date in fiscal 2019. 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 I, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of our credit facility and its covenants.
Seasonality and Quarterly Results
Our quarterly results of operations have fluctuated and are expected to continue to fluctuate in the future, primarily as a result of seasonal variances and the timing of sales and costs associated with opening new stores and closing underperforming stores. Non-capital expenditures, such as advertising and payroll incurred prior to the opening of a new store, are charged to expense as incurred. The timing and actual amount of expense recorded in closing an individual store can vary significantly depending, in part, on the period in which management commits to a closing plan, the remaining basis in the fixed assets to be disposed of at closing and the amount of any lease buyout. Therefore, our results of operations may be adversely affected in any quarter in which we incur pre-opening expenses related to the opening of new stores or incur store closing costs related to the closure of existing stores. 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 parts of the year. We experienced reduced sales during the fiscal 2020 Easter season as a result of the COVID-19 pandemic. We canceled any seasonal merchandise that had a short selling window and moved seasonal merchandise with longer selling periods to later shipping dates, as applicable. The back-to-school shopping period has also been impacted by the COVID-19 pandemic and is scheduled to start later and last longer than previous years in many of our markets. In the last two weeks of the second quarter of fiscal 2020, we experienced comparable store sales declines compared to the same period in the prior year due to the delay in back-to-school start dates. We anticipate that approximately 40% of school districts in the markets where we operate will return with virtual-only instruction, which may decrease our sales in those markets. Any other unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively affect our profitability.
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